1. Continuous fiscal deficits are more likely to present an inflation risk than one-off deficits designed to meet a short-term private spending decline.

Answer: False

2. When a nation runs a current account deficit accompanied by a government sector surplus (of equal proportion to GDP as the external deficit), we know that the private domestic sector will be spending less than they are earning.

Answer: False

3. To maintain financial stability, the monetary base has to be driven by changes in the money supply.

Answer: True