Quiz #552

• 1. The government has to issue debt if the policy interest rate is positive unless the central bank pays a positive interest rate on overnight reserves.
• False
• True
• 2. Other things equal, larger fiscal deficits as a percentage of GDP squeeze the availability of real resources that the private sector can use for other productive uses.
• False
• True
• 3. For a nation running a small external deficit, the government fiscal position will always be in deficit if the domestic private sector successfully spends less than its income.
• False
• True

Quiz #552 answers

• 1. The government has to issue debt if the policy interest rate is positive unless the central bank pays a positive interest rate on overnight reserves.

Answer: True

• 2. Other things equal, larger fiscal deficits as a percentage of GDP squeeze the availability of real resources that the private sector can use for other productive uses.

Answer: True

• 3. For a nation running a small external deficit, the government fiscal position will always be in deficit if the domestic private sector successfully spends less than its income.

Answer: True