Quiz #294 answers

• 1. If there is an external deficit of 2 per cent of GDP and the government balances its fiscal position then the private sector will have a an excess of spending relative to its income equal to 2 per cent of GDP.

Answer: True

• 2. By draining funds out of the system, government borrowing from the private sector reduces the risk that public deficit spending will overheat the economy.

Answer: False

• 3. Even Modern Monetary Theory (MMT) accepts the proposition that continually expanding the money supply will inevitably be inflationary.

Answer: False