Quiz #579 answers

• 1. When the government borrows from the non-government sector it eventually has to pay the bonds back on maturity. This will not be inflationary because the sovereign government just has to credit the bank accounts of those who hold the bonds to repay them.

Answer: False

• 2. When an external deficit and public deficit coincide, there must be a private sector deficit, given the sectoral balances framework.

Answer: False

• 3. In a situation where the private domestic sector embarks on an attempt to lift its overall saving ratio, we cannot conclude that the national government has to increase its net spending (deficit) to avoid employment losses.

Answer: True