Quiz #456 answers

• 1. Although we are told that a country is running a small current account deficit and that the private domestic sector is saving overall, we are unable to draw any conclusions about the state of the fiscal balance until we know the relative magnitudes of the other balances.

Answer: False

• 2. While a currency-issuing government does not have to issue bonds to match its deficit spending, one of the advantages of raising debt from the private sector is that it provides a boost to private wealth.

Answer: False

• 3. Fiscal austerity aims to reduce the stock of net government spending by reducing spending and/or increasing taxes.

Answer: False