1. Assuming the expenditure multiplier is greater than 1, deficit spending will have a greater impact on aggregate demand if there are no offsetting monetary operations by the central bank (government bond sales) draining the excess reserves created.
Answer: False
2. If the government succeeds in reducing its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.