Quiz #602

• 1. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:
• the less is the volume of investment funds in the non-government sector that can be used for other investments.
• the greater is non-government wealth held in the form of public debt.
• the more difficult it is for banks to attract deposits to initiate loans from.
• 2. A fiscal surplus indicates that the national government is:
• trying to slow the economy down and contain inflation.
• trying to reduce public debt.
• you cannot conclude anything about the government's policy intentions.
• 3. A currency-issuing government that runs a balanced fiscal balance over the economic cycle (peak to peak) must accept that after all the spending adjustments are exhausted, the private domestic balance will average a surplus over the same cycle, if the external balance averages a surplus over the same cycle.
• False
• True

Quiz #602 answers

• 1. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:

Answer: the greater is non-government wealth held in the form of public debt.

• 2. A fiscal surplus indicates that the national government is:

Answer: you cannot conclude anything about the government's policy intentions.

• 3. A currency-issuing government that runs a balanced fiscal balance over the economic cycle (peak to peak) must accept that after all the spending adjustments are exhausted, the private domestic balance will average a surplus over the same cycle, if the external balance averages a surplus over the same cycle.

Answer: True