1. If a nation has an external deficit and household saving increases as a proportion of disposable income then the government cannot run a fiscal surplus without output falling.

Answer: False

2. Politics aside, the US central bank could still increase interest rates even if the US government instructed it to directly purchase treasury debt to facilitate the national governments fiscal deficit.

Answer: True

3. A continuous fiscal deficit leads to public spending building up which while not a problem in the short-run, increases the long-run inflation risk faced by the economy.

Answer: False