Quiz #427

• 1. If a nation's external sector is in balance (and thus making no contribution to real GDP growth) then the private domestic sector cannot save if the government runs a balanced fiscal outcome.
• False
• True
• 2. A tax increase, which aims to increase tax revenue at the current level of national income by $x, will have a smaller initial negative impact on aggregate demand than a government spending cut of $x?
• False
• True
• 3. If the external sector is accumulating financial claims on the local economy and the GDP growth rate is lower than the real interest rate, then the private domestic sector and the government sector can run surpluses without damaging employment growth.
• False
• True

Quiz #427 answers

• 1. If a nation's external sector is in balance (and thus making no contribution to real GDP growth) then the private domestic sector cannot save if the government runs a balanced fiscal outcome.

Answer: False

• 2. A tax increase, which aims to increase tax revenue at the current level of national income by $x, will have a smaller initial negative impact on aggregate demand than a government spending cut of $x?

Answer: True

• 3. If the external sector is accumulating financial claims on the local economy and the GDP growth rate is lower than the real interest rate, then the private domestic sector and the government sector can run surpluses without damaging employment growth.

Answer: False