Quiz #596 answers

• 1. The role of the automatic stabilisers are to adjust government net spending in a counter-cyclical fashion to ensure that the government fiscal balance will rise during a recession to support the economy and then return to its appropriate level once growth resumes.

Answer: False

• 2. If a nation runs continuous fiscal deficits, the risk is that the accumulation of spending will eventually add to inflationary pressures.

Answer: False

• 3. If private domestic investment is less than private domestic saving and the current account is in deficit, then the government fiscal balance will be in deficit no matter what level of GDP is produced.

Answer: True