Quiz #415 answers

• 1. When a nation is generating large external surpluses, it can create more space for non-inflationary spending in the future if the government runs fiscal surpluses and accumulates them in a sovereign fund.

Answer: False

• 2. Whenever organisations such as the OECD or the IMF publish their latest analysis of the fiscal situation of a particular nation, you can typically conclude that the stated discretionary fiscal position for the government in question is more expansionary than it actually is.

Answer: True

• 3. Under current institutional arrangements (where deficits are matched $-for-$ by debt-issuance), the change in the ratio of public debt to GDP will exactly equal the primary deficit plus the interest service payments on the outstanding stock of debt both expressed as ratios to GDP minus the changes in the monetary base arising from official foreign exchange transactions.

Answer: False