1. A program of fiscal austerity (pushing towards surplus) will always undermine attempts by the private domestic sector to reduce its indebtedness when a nation external balance is in deficit.

Answer: True

2. A rising level of bank reserves will make it easier for banks to expand credit to the private sector if the demand for loans increases.

Answer: False

3. The public debt ratio is of no concern because economic growth will always bring it down after a recession.

Answer: False