Quiz #335 answers

• 1. As a matter of accounting, the financial assets held by the non-government sector rise $-for-$ when a sovereign government issues debt to the private bond holders.

Answer: False

• 2. In a fiat monetary system (for example, US or Australia) with an on-going external deficit that exceeds the public deficit (expressed as percentages of GDP), the domestic private domestic sector cannot reduce its overall debt levels by increasing its net saving without incurring income losses.

Answer: True

• 3. The imposition of fiscal rules which aim to limit the discretionary capacity of governments to net spend bias fiscal policy towards counter-cyclical responses when private spending is weak.

Answer: False