Quiz #494 answers

• 1. If yields rise on new bond issues then deficit spending by a currency-issuing government becomes more expensive.

Answer: False

• 2. In a fiat monetary system (for example, US or Australia) with an on-going external deficit that exceeds the public deficit (expressed as percentages of GDP), the domestic private sector cannot reduce its overall debt levels (by overall saving) without incurring employment losses and pushing the public deficit higher and the external deficit lower.

Answer: True

• 3. The imposition of fiscal rules which aim to limit the discretionary capacity of governments to net spend bias fiscal policy towards counter-cyclical responses when private spending is weak.

Answer: False