Quiz #518 answers

• 1. A Fiscal Risk index which measures the vulnerability of a nation to public debt default is never applicable to a national government which issues its own floating currency.

Answer: False

• 2. All voluntary legal constraints aside, the central bank cannot directly purchase treasury debt to facilitate the national governments fiscal deficit (that is, 'monetise the deficit') if it targets a positive short-term policy rate.

Answer: False

• 3. If the household saving ratio rises and there is an external deficit, then Modern Monetary Theory tells us that the government must increase net spending to fill the resulting increase in the non-government spending gap or else national output and income will fall.

Answer: False