Quiz #513 answers

• 1. If economy-wide average nominal wages fail to keep pace with the inflation rate then it means the owners of capital are enjoying an increasing share in GDP.

Answer: False

• 2. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would always find:

Answer: A fiscal deficit

• 3. Assume that the inflation and nominal interest rates both zero and constant. Consider a country with a public debt to GDP ratio of 100 per cent, which the mainstream economists consider to be dangerously high. The mainstream prescription is to run primary fiscal surpluses to stabilise and then reduce the debt ratio. Under the circumstances given, this strategy will only work if there is positive real GDP growth.

Answer: False