1. Only one of the following propositions is possible for a nation over any given period (with all balances expressed as a per cent of GDP):

An external deficit accompanied by a public surplus of equal size and the private domestic sector saving overall.
An external deficit accompanied by a public surplus of equal size and the private domestic sector dis-saving overall.
An external deficit accompanied by a larger public surplus and the private domestic sector saving overall.

2. If in attempting to estimate the cyclical component of a government fiscal outcome we underestimate the potential capacity of an economy, we will conclude that the government's discretionary fiscal position is less expansionary than it actually is.

3. Governments concerned with their public debt ratio should encourage growth because the debt ratio falls once economic growth resumes.