Quiz #300 answers

• 1. Start from a situation where the external surplus is the equivalent of 2 per cent of GDP and the fiscal surplus is 2 per cent. If the fiscal balance stays constant and the external surplus rises to the equivalent of 4 per cent of GDP then you can conclude that National income also rises and the private surplus moves from 0 per cent of GDP to 2 per cent of GDP.

Answer: True

• 2. Private sector wealth is invariant to the decision by government to issue bonds to the non-government sector to match its deficit spending as against not issuing any bonds.

Answer: True

• 3. When a government records a fiscal surplus, which means it is withdrawing more purchasing power from the economy than it is adding, we know that it is seeking to attenuate the growth in aggregate demand.

Answer: False