Quiz #250 answers

• 1. It is common to use the term deleveraging to describe the reduction in indebtedness for a particular sector or group in the economy. In most nations at present, both the government and the private domestic sectors are carrying historically large debt ratios. However, under current public sector debt-issuance arrangements and given the national accounting relations, only one of these sectors can reduce its debt level at a time.

Answer: False

• 2. When a government runs a continuous deficit (spending more than they are receiving in revenue), the risk is that the accumulated public spending will build up over time and cause inflation.

Answer: False

• 3. A central bank could always directly purchase treasury debt to facilitate the government deficit without compromising its monetary policy stance as long as it is running a near zero interest rate policy target.

Answer: False