Quiz #445

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. If the private domestic sector successfully spends less than its overall income, then we would always find a public sector deficit.
• False
• True
• 2. The automatic stabilisers built into fiscal policy operate to return the government's fiscal balance returns to its appropriate level once growth returns to trend following a downturn.
• False
• True
• 3. The government has to issue debt if the central bank is targetting a non-zero policy rate and is reluctant to pay a competitive return on excess bank reserves.
• False
• True

Quiz #445 answers

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. If the private domestic sector successfully spends less than its overall income, then we would always find a public sector deficit.

Answer: True

• 2. The automatic stabilisers built into fiscal policy operate to return the government's fiscal balance returns to its appropriate level once growth returns to trend following a downturn.

Answer: False

• 3. The government has to issue debt if the central bank is targetting a non-zero policy rate and is reluctant to pay a competitive return on excess bank reserves.

Answer: True