Quiz #305 answers

• 1. Assume a nation is running an external surplus equivalent to 2 per cent of GDP and the government manages to run a fiscal surplus equivalent to 1 per cent of GDP. The national income changes associated with these balances would ensure that the private domestic sector was running an overall deficit of 1 per cent of GDP.

Answer: False

• 2. Starting from the external situation in Question 1, with the surplus being the equivalent of 2 per cent of GDP but this time the fiscal surplus is currently 2 per cent of GDP. 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 minus 2 per cent of GDP to plus 2 per cent of GDP.

Answer: False

• 3. Even a sovereign, currency-issuing government has to receive tax dollars from the non-government at times in order to to spend effectively.

Answer: True