Quiz #289

• 1. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:
• the less is the volume of investment funds in the non-government sector that can be used for other investments.
• the greater is non-government wealth held in the form of public debt.
• the more difficult it is for banks to attract deposits to initiate loans from.
• 2. A fiscal surplus indicates that the national government is
• trying to slow the economy down and contain inflation.
• trying to reduce public debt
• you cannot conclude anything about the government's policy intentions
• 3. A currency-issuing government can run a balanced fiscal balance over the business cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus.
• False
• True

Quiz #289 answers

• 1. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:

Answer: the greater is non-government wealth held in the form of public debt.

• 2. A fiscal surplus indicates that the national government is

Answer: you cannot conclude anything about the government's policy intentions

• 3. A currency-issuing government can run a balanced fiscal balance over the business cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus.

Answer: True