Quiz #569

• 1. Adherence to a 'balanced budget rule', measured over a full economic cycle (peak to peak) will force the private domestic sector balance to run a deficit on average if the external balance is in deficit on average over the same cycle.
• False
• True
• 2. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:
• The less is the volume of investment funds in the non-government sector that can be used for other investments.
• The greater is non-government wealth held in the form of public debt.
• The more difficult it is for banks to attract deposits to initiate loans from.
• All of the above.
• 3. A fiscal surplus indicates that the national government is:
• Trying to slow the economy down and contain inflation.
• Trying to reduce public debt.
• You cannot conclude anything about the government's policy intentions.

Quiz #569 answers

• 1. Adherence to a 'balanced budget rule', measured over a full economic cycle (peak to peak) will force the private domestic sector balance to run a deficit on average if the external balance is in deficit on average over the same cycle.

Answer: True

• 2. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:

Answer: The greater is non-government wealth held in the form of public debt.

• 3. A fiscal surplus indicates that the national government is:

Answer: You cannot conclude anything about the government's policy intentions.