Quiz #416

• 1. If the national accounts of a nation reveal that its external surplus is equivalent to 2 per cent of GDP and the private domestic sector is saving overall 3 per cent of GDP, then we know that national income adjustments would ensure that the fiscal balance was in:
• Deficit equal to 1 per cent of GDP.
• Surplus equal to 1 per cent of GDP.
• Deficit equal to 5 per cent of GDP.
• Surplus equal to 5 per cent of GDP.
• None of the above.
• 2. Even though a government that issues its own fiat currency is not revenue constrained, it is still correct to say that recipients of income support provided by such a national government live off the hard work of those who pay income taxes.
• False
• True
• 3. There is no difference in terms of the government's impact on aggregate demand, between the government matching its deficit spending with bond issues to the non-government sector and the situation where the government instructed the central bank to buy its bonds to match the deficit.
• False
• True

Quiz #416 answers

• 1. If the national accounts of a nation reveal that its external surplus is equivalent to 2 per cent of GDP and the private domestic sector is saving overall 3 per cent of GDP, then we know that national income adjustments would ensure that the fiscal balance was in:

Answer: Deficit equal to 1 per cent of GDP.

• 2. Even though a government that issues its own fiat currency is not revenue constrained, it is still correct to say that recipients of income support provided by such a national government live off the hard work of those who pay income taxes.

Answer: True

• 3. There is no difference in terms of the government's impact on aggregate demand, between the government matching its deficit spending with bond issues to the non-government sector and the situation where the government instructed the central bank to buy its bonds to match the deficit.

Answer: True