Quiz #293

• 1. A declining budget deficit tells us that the government is pursuing a more contractionary fiscal policy stance.
• False
• True
• Cannot tell as we need more information on what the external sector is doing.
• 2. If the household saving ratio rises and there is an external deficit then government must increase its fiscal deficit to fill the private spending gap or else national output and income will fall.
• False
• True
• 3. When a currency-issuing government voluntarily constrains itself to borrow from the private sector to cover its net spending (deficits) position, it substitutes public spending for the borrowed private funds and reduces the funds available for private sector borrowing.
• False
• True

Quiz #293 answers

• 1. A declining budget deficit tells us that the government is pursuing a more contractionary fiscal policy stance.

Answer: False

• 2. If the household saving ratio rises and there is an external deficit then government must increase its fiscal deficit to fill the private spending gap or else national output and income will fall.

Answer: False

• 3. When a currency-issuing government voluntarily constrains itself to borrow from the private sector to cover its net spending (deficits) position, it substitutes public spending for the borrowed private funds and reduces the funds available for private sector borrowing.

Answer: False