Quiz #25

• 1. A stock-flow consistent macroeconomic framework shows categorically that as long as net government spending grows in line with GDP, inflation will not be a problem.
• False
• True
• 2. A rising federal budget deficit indicates the stock of net government spending at that level is also rising to support private saving.
• False
• True
• 3. When an external deficit (X M < 0) and public deficit (G - T > 0) coincide, there must be a private sector deficit, which means that governments can only really run budget deficits safely to support a private sector surplus, when net exports are strong.
• False
• True
• 4. If an individual repays a bank loan in dollar bills instead of with a cheque, this transaction will not destroy the financial assets created when the loan was made because a bank will never destroy that cash. So not all transactions between non-government entities net to zero.
• False
• True
• 5. The Austrian School is correct in one way that we should acknowledge. If there is a lack of desire to save among households then investors will find it difficult to get funds at reasonable prices to build productive capacity.
• False
• True