Quiz #446 answers

• 1. In terms of the initial impact on national income, a tax increase which aims to increase tax revenue at the current level of national income by $x is less damaging than a spending cut of $x?

Answer: True

• 2. When private households increase their saving ratios (from disposable income) and firms decline to invest more to cover the loss of consumption, the only option available to avoid overall employment losses, is for the government to expand public deficits.

Answer: False

• 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