Quiz #384 answers

• 1. Modern Monetary Theory accepts that continually expanding the money supply will inevitably be inflationary.

Answer: False

• 2. If there is an external deficit of 2 per cent of GDP and the government balances its fiscal outcome then the private sector will have an excess of spending relative to its income equal to 2 per cent of GDP.

Answer: True

• 3. A national government would be unable to rely on the central bank purchasing treasury debt to match its fiscal deficit if the central bank is targeting a positive short-term policy rate.

Answer: False