Quiz #341 answers

• 1. If the share in national income that workers receive (the wage share) falls then their real standard of living is reduced.

Answer: False

• 2. Government spending can crowd out private spending.

Answer: True

• 3. Suppose that the government announced it intended to cut its deficit from 4 per cent of GDP to 2 per cent in the coming year and during that year net exports were projected to move from a deficit of 1 per cent of GDP to a surplus of 1 per cent of GDP. If the private domestic sector engaged in debt reduction which resulted in it spending less than it earned to the measure of 5 per cent of GDP, then the fiscal austerity plans will undermine growth even if the net export surplus was realised.

Answer: True