1. One advantage of low inflation is that the central bank can better use balance sheet management techniques to control yields on public debt at certain targetted maturities.

2. Adopting a fiscal rule that requires the government maintain a fiscal balance of zero at all times means that the fiscal outcome is insulated from the impact of the automatic stabilisers.

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

A nation can run an external deficit and equal government surplus while the private domestic sector is saving overall.
A nation can run an external deficit and equal government surplus while the private domestic sector is dis-saving overall.
A nation can run an external deficit and a larger government surplus while the private domestic sector is saving overall.
None of the above are possible as they all defy the sectoral balances accounting identity.