Quiz #261

• 1. When a currency-issuing government voluntarily constrains itself to borrow from the private sector to cover its deficit spending, it logically reduces the funds available for private investment expenditure.
• False
• True
• 2. An increasing fiscal deficit tells us nothing about the government's policy intentions.
• False
• True
• 3. The crucial difference between a monetary system based on the convertible currency backed by gold and a fiat currency monetary is that under the former system:
• excessive national government spending led to inflation.
• the national government had to issue debt to cover spending above taxation.
• the national government could not use net spending to achieve full employment.

Quiz #261 answers

• 1. When a currency-issuing government voluntarily constrains itself to borrow from the private sector to cover its deficit spending, it logically reduces the funds available for private investment expenditure.

Answer: False

• 2. An increasing fiscal deficit tells us nothing about the government's policy intentions.

Answer: True

• 3. The crucial difference between a monetary system based on the convertible currency backed by gold and a fiat currency monetary is that under the former system:

Answer: the national government had to issue debt to cover spending above taxation.