Quiz #295 answers

• 1. During a recession, a government should use expansionary fiscal policy to restore trend real GDP growth if it wants to reduce unemployment rate.

Answer: False

• 2. The current period is marked by private households increasing their saving ratios (from disposable income) and firms declining to invest. These trends indicate that fiscal deficits have to be higher to avoid further employment losses.

Answer: False

• 3. If the external sector is accumulating financial claims on the local economy and the GDP growth rate is lower than the real interest rate, then the private domestic sector and the government sector can run surpluses without damaging employment growth.

Answer: False