1. Real wages growth has been non-existent or low in many advanced nations in recent years. However, if workers succeed in gaining real wages increases then this will squeeze the share of profits in national income.

Answer: False

2. The government has to issue debt to match an on-going fiscal deficit if the central bank is targetting, say a 2 per cent short-term interest rate and declines to pay a return on excess bank reserves.

Answer: True

3. Suppose that the government announced it intended to cut its deficit from 4 per cent of GDP to 2 per cent in the coming year and during that year net exports plus net income flows were projected to move from a deficit of 1 per cent of GDP to a surplus of 1 per cent of GDP. If private sector deleveraging resulted in it spending less than it earned to the measure of 5 per cent of GDP, then the fiscal austerity plans will undermine growth even if the net export surplus was realised.

Answer: True