Quiz #279 answers

• 1. A nation that issues its own currency and floats it on international foreign exchange markets can never be financially insolvent with respect to the debt it issues.

Answer: False

• 2. Under current institutional arrangements, the change in the ratio of public debt to GDP will exactly equal the primary deficit plus the interest service payments on the outstanding stock of debt both expressed as ratios to GDP minus the changes in the monetary base arising from official foreign exchange transactions conducted by the central bank.

Answer: False

• 3. As a matter of accounting, the financial assets held by the non-government sector rise $-for-$ when a sovereign government issues debt.

Answer: False