Quiz #374

• 1. Mainstream economists use the notion of "crowding out" to argue that public spending squeezes out private spending and results in a less efficient allocation of resources overall. Modern Monetary Theory (MMT) denies that crowding out can occur.
• False
• True
• 2. A rising government deficit will always allow the private domestic sector to increase its saving in nominal terms.
• False
• True
• 3. If government net spending increases (rising fiscal deficit) then the policy stance is becoming more expansionary and the only risk is that nominal aggregate spending growth might exceed the real capacity of the economy to respond by increasing real output and cause inflation.
• False
• True

Quiz #374 answers

• 1. Mainstream economists use the notion of "crowding out" to argue that public spending squeezes out private spending and results in a less efficient allocation of resources overall. Modern Monetary Theory (MMT) denies that crowding out can occur.

Answer: False

• 2. A rising government deficit will always allow the private domestic sector to increase its saving in nominal terms.

Answer: False

• 3. If government net spending increases (rising fiscal deficit) then the policy stance is becoming more expansionary and the only risk is that nominal aggregate spending growth might exceed the real capacity of the economy to respond by increasing real output and cause inflation.

Answer: False