Quiz #235 answers

• 1. When an external deficit and public deficit coincide, the private sector is in balance (spending is equal to income).

Answer: False

• 2. Which scenario represents a more expansionary outcome: (a) A budget deficit equivalent to 5 per cent of GDP (including the impact of automatic stabilisers equivalent to 3 per cent of GDP). (b) A budget deficit equivalent to 3 per cent of GDP. (c) You cannot tell because you do not know the decomposition between the cyclical and structural components in Option (b)

Answer: Option (a)

• 3. With rising aged dependency ratios, the fact that a sovereign government is never financially constrained means that it can always provide first-class health care to its aeging citizens.

Answer: False