Quiz #304

• 1. Over a given economic cycle (peak to peak), if a nation's external sector is on average balanced and the government surplus of tax revenue over its spending is, on average, equal to 1 per cent of GDP, then the private domestic sector's spending-income balance will on average be in:
• Deficit of 1 per cent of GDP
• Surplus of 1 per cent of GDP
• 2. The immediate expansionary impact of a tax cut, designed to generate $x revenue at the current level of national income, will be less than an increase of public spending cut of $x.
• False
• True
• 3. If the external sector is accumulating financial claims on the local economy (that is, providing foreign savings to the domestic 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.
• False
• True

Quiz #304 answers

• 1. Over a given economic cycle (peak to peak), if a nation's external sector is on average balanced and the government surplus of tax revenue over its spending is, on average, equal to 1 per cent of GDP, then the private domestic sector's spending-income balance will on average be in:

Answer: Deficit of 1 per cent of GDP

• 2. The immediate expansionary impact of a tax cut, designed to generate $x revenue at the current level of national income, will be less than an increase of public spending cut of $x.

Answer: True

• 3. If the external sector is accumulating financial claims on the local economy (that is, providing foreign savings to the domestic 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