Quiz #346

• 1. Assume that the national accounts of a nation is reveal that its external surplus is equivalent to 2 per cent of GDP and the private domestic sector is saving overall 3 per cent of GDP. We would also observe: .
• A fiscal deficit equal to 1 per cent of GDP.
• A fiscal surplus equal to 1 per cent of GDP.
• A fiscal deficit equal to 5 per cent of GDP.
• A fiscal surplus equal to 5 per cent of GDP.
• 2. There is no difference in terms of the impact on aggregate demand, between the government matching its deficit spending with bond issues and a situation where the government instructs the central bank to buy its bonds to match the deficit.
• False
• True
• 3. The Italian government's projected fiscal deficit for 2016 will be lower as a percentage of GDP than its estimated 2015 outcome. It is correct to conclude that in 2016 it will still be pursuing a contractionary fiscal policy stance despite the political rhetoric about its fiscal position being expansionary.
• False
• True

Quiz #346 answers

• 1. Assume that the national accounts of a nation is reveal that its external surplus is equivalent to 2 per cent of GDP and the private domestic sector is saving overall 3 per cent of GDP. We would also observe: .

Answer: A fiscal deficit equal to 1 per cent of GDP.

• 2. There is no difference in terms of the impact on aggregate demand, between the government matching its deficit spending with bond issues and a situation where the government instructs the central bank to buy its bonds to match the deficit.

Answer: True

• 3. The Italian government's projected fiscal deficit for 2016 will be lower as a percentage of GDP than its estimated 2015 outcome. It is correct to conclude that in 2016 it will still be pursuing a contractionary fiscal policy stance despite the political rhetoric about its fiscal position being expansionary.

Answer: False