Quiz #577 answers

• 1. The public debt ratio will always fall when economic growth is positive because the primary fiscal deficit falls due to the automatic stabilisers (more tax revenue, less welfare spending), and, the denominator, GDP rises.

Answer: False

• 2. The Bank of England will, under a new arrangement with H.M. Treasury, be able to credit bank accounts on behalf of government, without the government having to match its fiscal deficits with private debt issuance. This means they will not be able to maintain an interest rate target above zero per cent.

Answer: False

• 3. One important lesson to be drawn from Modern Monetary Theory (MMT), which is overlooked in the current pandemic, is that when economic growth resumes, the automatic stabilisers work will ensure that the government fiscal balance returns to its appropriate level.

Answer: False