1. Modern Monetary Theory (MMT) tells us that while a currency-issuing government running a deficit can never reduce the public debt to GDP ratio the rising ratio is of no concern because such a government faces no risk of insolvency.
Answer: False
2. In 1998, Russia was forced to default on its outstanding public debt after it faced a major collapse of oil prices in world markets which negated its capacity to repay foreign currency-denominated loans via net exports. But the defaults were ultimately due to the currency peg against the US dollar that they voluntarily had put in place.
Answer: False
3. Imagine that macroeconomic policy is geared towards keeping real GDP growth on a 3 per cent per annum trend. If labour productivity is growing at 2 per cent per annum, the labour force is growing at 1.5 per cent per annum, and the average working week is constant in hours, then this policy regime will result in: