Quiz #512 answers

• 1. In a nation running an on-going external deficit, if the private domestic sector decides to increase the extent that it spends less than its overall income, then the national government has to increase its discretionary fiscal deficit in order to avoid rising employment losses.

Answer: True

• 2. The build-up of Chinese holdings of US government debt has allowed US citizens to enjoy a higher material standard of living at the expense of the residents of China.

Answer: True

• 3. Short-term interest rates are set by the central bank while the fiscal strategy manifests in tax and spending decisions by the government. Whereas the non-government sector cannot directly influence the interest rate target being set, it does, ultimately, determine the size of the fiscal deficit at any point in time.

Answer: True