1. Assume that inflation is stable, there is excess productive capacity, and the central bank maintains its current monetary policy settings. Then, if government spending increases by $X dollars and private investment and exports are unchanged, we know, as a result of our understanding of the expenditure multiplier, that nominal GDP will grow until the sum of taxation revenue, import spending and household saving rises by exactly $X dollars.

2. When a currency-issuing government voluntarily constrains itself to borrow from the non-government sector to cover its fiscal deficit, it substitutes its spending for the borrowed funds and reduces the private capacity to borrow and spend.

3. The crucial difference between a monetary system based on the convertible currency backed by gold and a fiat currency monetary is:

that under the former system, excessive national government spending led to inflation.
that under the former system, the national government had to issue debt to cover spending above taxation.
that under the former system, the national government could not use net spending to achieve full employment.