Quiz #258 answers

• 1. When the private domestic sector decides to increase the surplus of its income over spending we cannot conclude that the national government has to increase its net spending (deficit) to avoid employment losses.

Answer: True

• 2. When an external deficit and public deficit coincide, there must be a private sector deficit. This suggests that governments can only run budget deficits safely to support a private sector surplus, when net exports are strong.

Answer: False

• 3. The stronger is the the demand for public bonds at a government auction the lower the yields will be at that asset maturity but this tells us nothing about the effect of fiscal deficits on short-term interest rate

Answer: True