Quiz #317 answers

• 1. This week, a ratings agency downgraded Greek government debt because the nation faces insolvency risk. If Greece left the Eurozone and re-established its own currency, converted all euro liabilities to their own currency, they would eliminate that risk on all future liabilities.

Answer: False

• 2. European Commission estimates of structural budget deficits in the Eurozone under the Excessive Deficit Mechanism lead to the conclusion that a government's discretionary fiscal position is less expansionary than it actually is.

Answer: False

• 3. Under current institutional arrangements, the change in the ratio of public debt to GDP will exactly equal the primary fiscal deficit plus the interest service payments on the outstanding stock of debt both expressed as ratios to GDP minus the changes in the monetary base arising from official foreign exchange transactions.

Answer: False