Quiz #266 answers

• 1. Assume that a nation is running an external deficit of 2 per cent of GDP. Under these circumstances, whether the public sector records a deficit or not depends on how large a surplus the private domestic sector records.

Answer: False

• 2. It has been argued that if the fiscal rules in the Eurozone were abandoned, and the automatic stabilisers in the Member-State fiscal positions were allowed to operate unfettered, then they would return the government fiscal balance to its appropriate level once growth returns following a downturn.

Answer: False

• 3. The government has to issue debt if the central bank is targetting a non-zero policy rate and is reluctant to pay a return on excess bank reserves.

Answer: True