Quiz #458 answers

• 1. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.

Answer: False

• 2. A public employment guarantee program, which required workers to attend a government centre each day to do jigsaw puzzles, would have no impact on national income.

Answer: False

• 3. If the government reduces 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.

Answer: False