Quiz #338 answers

• 1. The private domestic sector will always be spending less than it earns in situations where the government fiscal balance is zero and the nation runs continuous external deficits.

Answer: False

• 2. If a national government receives advice that the estimated output gap for their nation was less than previously thought, then other things equal, its discretionary fiscal austerity would have to be intensified to achieve a zero structural fiscal balance if it was currently in deficit.

Answer: True

• 3. Opponents of continuous fiscal deficits often agree that short-period of deficit spending is not likely to be inflationary when the private demand is weak. Their main concern is that the accumulated stock of spending associated with continuous fiscal deficits eventually increases the risk of inflation. Their concern has validity.

Answer: False