Quiz #264 answers

• 1. Ignoring political reality, the central bank in a currency-issuing nation could still increase interest rates even if the government instructed it to directly purchase treasury debt to facilitate the national governments fiscal deficit.

Answer: True

• 2. If a nation is earning less than it is spending with respect to its transactions with the rest of the world and household saving suddenly increases as a proportion of disposable income, then the government could still run its current surplus without a decline in output and income occurring.

Answer: True

• 3. A continuous fiscal deficit leads to public spending building up and an increase in the inflation risk faced by the economy.

Answer: False