1. Which fiscal deficit outcome (expressed in terms of the scale relative to GDP) is the most expansionary in terms of aggregate demand?
Answer: 3 per cent of GDP
2. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.
Answer: False
3. If all national governments simultaneously manage to run public surpluses (a neo-liberal nirvana) then it would still be possible for all their respective private domestic sectors to simultaneously save overall as long as no nation ran an external deficit.