1. Aggregate demand is a crucial determinant of employment and output at each point in time, but the output that has to be purchased is the outcome of long-run trend factors such as technological change and population growth.

2. It is true that all official interest rates (which include the short-term policy target rate and all longer-maturity rates on government bonds) can be controlled by the central bank within the operational structure and tools at their disposable. However, the government doesn't pursue this option because they want higher interest rates to be set by the private capital markets so that they can dampen aggregate demand and avoid inflation.

3. One of the problems facing the Eurozone is that Greece, Ireland and Spain enjoyed rapid growth and allowed their real wage levels to rise faster than labour productivity. They thus lost competitiveness to Germany which contained real wages growth by a program of deregulation. Given that the member countries could not rely on depreciation of their exchange rate to offset this competitive loss their domestic wage adjustment now has to be more painful.

4. The change in the net worth of the non-government sector when the government increases its net spending is invariant to government issuing debt $-for-$ to match the net spending rise.

5. The expansionary impact of deficit spending on aggregate demand is lower when the government matches the deficit with debt-issuance because then excess reserves are drained and the purchasing power is taken out of the monetary system.

1. Aggregate demand is a crucial determinant of employment and output at each point in time, but the output that has to be purchased is the outcome of long-run trend factors such as technological change and population growth.

Answer: False

Explanation: Please see My Sunday media nightmare for more information or post a comment.

2. It is true that all official interest rates (which include the short-term policy target rate and all longer-maturity rates on government bonds) can be controlled by the central bank within the operational structure and tools at their disposable. However, the government doesn't pursue this option because they want higher interest rates to be set by the private capital markets so that they can dampen aggregate demand and avoid inflation.

Answer: False

Explanation: Please see Who is in charge? for more information or post a comment.

3. One of the problems facing the Eurozone is that Greece, Ireland and Spain enjoyed rapid growth and allowed their real wage levels to rise faster than labour productivity. They thus lost competitiveness to Germany which contained real wages growth by a program of deregulation. Given that the member countries could not rely on depreciation of their exchange rate to offset this competitive loss their domestic wage adjustment now has to be more painful.

Answer: False

Explanation: Please see Doomed from the start for more information or post a comment.

4. The change in the net worth of the non-government sector when the government increases its net spending is invariant to government issuing debt $-for-$ to match the net spending rise.

Answer: True

Explanation: Please see Why history matters for more information or post a comment.

5. The expansionary impact of deficit spending on aggregate demand is lower when the government matches the deficit with debt-issuance because then excess reserves are drained and the purchasing power is taken out of the monetary system.

Answer: False

Explanation: Please see Why history matters for more information or post a comment.