Quiz #313

• 1. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):
• None of the above are possible as they all defy the sectoral balances accounting identity.
• A nation can run a current account deficit with a government sector surplus that is larger, while the private domestic sector is spending less than they are earning.
• A nation can run a current account deficit accompanied by a government sector surplus of equal proportion to GDP, while the private domestic sector is spending more than they are earning.
• A nation can run a current account deficit accompanied by a government sector surplus of equal proportion to GDP, while the private domestic sector is spending less than they are earning.
• 2. One possible problem with running continuous budget deficits is that the spending builds up over time and with inflation eventually becoming the risk that has to be managed.
• False
• True
• 3. If employment growth matches the pace of growth in the civilian population (people above 15 years of age) then the economy will experience a constant unemployment rate as long as participation rates do not change.
• False
• True

Quiz #313 answers

• 1. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):

Answer: A nation can run a current account deficit accompanied by a government sector surplus of equal proportion to GDP, while the private domestic sector is spending more than they are earning.

• 2. One possible problem with running continuous budget deficits is that the spending builds up over time and with inflation eventually becoming the risk that has to be managed.

Answer: False

• 3. If employment growth matches the pace of growth in the civilian population (people above 15 years of age) then the economy will experience a constant unemployment rate as long as participation rates do not change.

Answer: True