Quiz #401 answers

• 1. A rising fiscal deficit indicates an expansionary shift in government policy and the challenge is to ensure the nominal demand stimulus does not exceed the real capacity of the economy to respond by increasing real output.

Answer: False

• 1. The imposition of taxes by the national government creates unemployment, other things equal.

Answer: True

• 3. When economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion and ensure that the government fiscal balance returns to its appropriate level.

Answer: False