1. A nation can run an external deficit accompanied by a government sector surplus (of equal proportion to GDP as the external deficit) as long as the private domestic sector is spending less than they are earning.

Answer: False

2. To ensure that the financial system is stable, the central bank allows the money supply to be driven by the monetary base.

Answer: False

3. Sovereign government spending becomes more costly when the bond markets push up yields on new bond issues.

Answer: False