Quiz #592 answers

• 1. The difference between a situation where the government runs a deficit and matches it with debt-issuance to the non-government sector to a situation where debt is only issued to the central bank is that non-government sector financial wealth rises in the first case.

Answer: False

• 2. If net exports are running at 2 per cent of GDP, and the private domestic sector is saving overall an equivalent of 3 per cent of GDP, the government must be running a surplus equal to 1 per cent of GDP.

Answer: False

• 3. To reduce the public debt ratio, the government has to eventually run primary fiscal surpluses (that is, spend less than they raise in taxes net of interest payments on past debt).

Answer: False