Quiz #479

• 1. As long as employment growth keeps pace with labour force growth, unemployment will not rise.
• False
• True
• 2. Modern Monetary Theory shows that governments do not have to issue debt to match their deficit spending. However, byissuing debt, the wealth of the non-government sector immediately increases, which would not happen if the central bank just credited bank accounts on behalf of the treasury without the debt matching.
• False
• True
• 3. If the current account balance is running at 2 per cent of GDP, and the private domestic sector overall is saving an equivalent of 3 per cent of GDP, the government must:
• Be running a surplus equal to 1 per cent of GDP.
• Be running a surplus equal to 5 per cent of GDP.
• Be running a deficit equal to 1 per cent of GDP.
• Be running a deficit equal to 5 per cent of GDP.

Quiz #479 answers

• 1. As long as employment growth keeps pace with labour force growth, unemployment will not rise.

Answer: False

• 2. Modern Monetary Theory shows that governments do not have to issue debt to match their deficit spending. However, byissuing debt, the wealth of the non-government sector immediately increases, which would not happen if the central bank just credited bank accounts on behalf of the treasury without the debt matching.

Answer: False

• 3. If the current account balance is running at 2 per cent of GDP, and the private domestic sector overall is saving an equivalent of 3 per cent of GDP, the government must:

Answer: Be running a deficit equal to 1 per cent of GDP.