Quiz #372 answers

• 1. If the external sector is in deficit overall and real GDP growth rate is higher than the current real interest rate, then:

Answer: Either the private domestic sector and the government sector overall can reduce their respective net debt liabilities.

• 2. The debt of a currency-issuing government with a floating exchange rate is not really a liability because the government can just continuously roll the debt over without ever having to pay it back. This is different to a household, the user of the currency, which not only has to service its debt but also has to repay them at the due date.

Answer: False

• 3. The fact that large scale quantitative easing conducted by central banks in Japan, the UK, USA and more recently, in Europe has not caused inflation provides a strong refutation of the mainstream Quantity Theory of Money, which claims that growth in the stock of money will be inflationary.

Answer: False