Quiz #395 answers

• 1. If any nation adopts a 'balanced budget' rule (that government spending plus interest payments must equal revenue at all times) and they successfully achieve that goal then the private domestic sector in nations that run external deficits will always spend less than they earn.

Answer: False

• 2. The non-government sector does not enjoy an increase in its financial asset holdings as a result of its sovereign government issuing debt to match its net spending.

Answer: True

• 3. In a situation where the private domestic sector decides to lift its overall saving rate we cannot conclude that the national government has to increase its net spending (deficit) to avoid employment losses.

Answer: True