Quiz #525 answers

• 1. The statement that lending is capital-constrained rather than reserve constrained would not apply if the banks had to maintain a reserve ratio of 100 per cent.

Answer: False

• 2. It is impossible for a government to run a public surplus without impairing growth because it is likely that the private domestic sector will desire to save overall.

Answer: False

• 3. A rising government deficit indicates an expansionary shift in policy and the challenge is to calibrate that expansion to ensure nominal demand growth does not exceed the real capacity of the economy to respond by increasing real output.

Answer: False