Quiz #586 answers

• 1. The issuance of bonds by a currency-issuing government to match its net spending (fiscal deficit) augments the nominal wealth held by the non-government sector.

Answer: False

• 2. When a country runs a small current account deficit and the private domestic sector is saving overall, the government fiscal balance will always be in deficit.

Answer: True

• 3. When discussing cuts to discretionary national fiscal positions, progressive voices typically support imposing tax increases while conservatives recommend spending cuts and privatisation. In terms of the initial impact on national income, which policy option will be more damaging - a tax increase which aims to increase tax revenue at the current level of national income by $x or a spending cut of $x?

Answer: Spending cut