Quiz #519 answers

• 1. If the inflation rate is steady and the central bank maintains a constant nominal interest rate, then, under current institutional arrangements, the public debt ratio will always increase if the government deficit doubles (say, from 2 to 4 per cent of GDP) although Modern Monetary Theory would not place any special importance in that increase.

Answer: False

• 2. The real purchasing power of workers' wages rises when the rate of growth in nominal earnings is faster than the growth in labour productivity.

Answer: False

• 3. A fiscal surplus indicates that the national government is trying to slow the economy down and contain inflation.

Answer: False