Quiz #437

• 1. Which scenario represents a more expansionary outcome:
• A fiscal deficit of 5 per cent of GDP with an automatic stabiliser component equal to 3 per cent of GDP.
• A fiscal deficit of 3 per cent of GDP
• You cannot tell because you do not know the decomposition between the cyclical and structural components in Option (B)
• 2. When the government matches an increase in deficit spending with debt issued to the private sector, the growth in aggregate demand is less than would be the case if the government didn't borrow.
• False
• True
• 3. In the context of population ageing, the fact that a sovereign government is never financially constrained means that it can always provide first-class health care to its citizens should it desire to do so.
• False
• True

Quiz #437 answers

• 1. Which scenario represents a more expansionary outcome:

Answer: A fiscal deficit of 5 per cent of GDP with an automatic stabiliser component equal to 3 per cent of GDP.

• 2. When the government matches an increase in deficit spending with debt issued to the private sector, the growth in aggregate demand is less than would be the case if the government didn't borrow.

Answer: False

• 3. In the context of population ageing, the fact that a sovereign government is never financially constrained means that it can always provide first-class health care to its citizens should it desire to do so.

Answer: False