Quiz #593

• 1. Which scenario represents a more expansionary outcome:
• A fiscal deficit equivalent to 5 per cent of GDP (including the impact of automatic stabilisers equivalent to 3 per cent of GDP).
• A fiscal deficit equivalent to 3 per cent of GDP.
• You cannot tell because you do not know the decomposition between the cyclical and structural components in Option (B)
• 2. Fiscal austerity (manifesting as a fiscal surplus) will not damage economic growth if the external balance is in surplus and adding net spending to the economy.
• False
• True
• 3. In the context of population ageing, the fact that a sovereign government is never financially constrained means that it can always provide first-class health care to its citizens.
• False
• True

Quiz #593 answers

• 1. Which scenario represents a more expansionary outcome:

Answer: A fiscal deficit equivalent to 5 per cent of GDP (including the impact of automatic stabilisers equivalent to 3 per cent of GDP).

• 2. Fiscal austerity (manifesting as a fiscal surplus) will not damage economic growth if the external balance is in surplus and adding net spending to the economy.

Answer: False

• 3. In the context of population ageing, the fact that a sovereign government is never financially constrained means that it can always provide first-class health care to its citizens.

Answer: False