Quiz #524
- 1. If the external sector is in deficit overall and GDP growth rate is faster than the real interest rate, then both the private domestic sector and the government sector overall can reduce their overall respective net liabilities.
- 2. The debt of a government which issues its own currency and floats it in international markets is not really a liability because the government can just continuously roll it over without ever having to pay it back. This is different to a household, the user of the currency, which not only has to service its debt obligations but also has to repay them at the due date.
- 3. The fact that large scale quantitative easing conducted by central banks in Japan in 2001 and now, more recently, in the UK and the USA has not caused inflation provides a strong refutation of the mainstream Quantity Theory of Money, which claims that growth in the stock of money will be inflationary.
Quiz #524 answers
- 1. If the external sector is in deficit overall and GDP growth rate is faster than the real interest rate, then both the private domestic sector and the government sector overall can reduce their overall respective net liabilities.
Answer: False
- 2. The debt of a government which issues its own currency and floats it in international markets is not really a liability because the government can just continuously roll it over without ever having to pay it back. This is different to a household, the user of the currency, which not only has to service its debt obligations but also has to repay them at the due date.
Answer: False
- 3. The fact that large scale quantitative easing conducted by central banks in Japan in 2001 and now, more recently, in the UK and the USA has not caused inflation provides a strong refutation of the mainstream Quantity Theory of Money, which claims that growth in the stock of money will be inflationary.
Answer: False