Quiz #617 answers

• 1. Widening the tax base provides the government with more capacity to spend.

Answer: True

• 2. If there is an external deficit, and the private domestic sector successfully increases its overall saving as a percentage of GDP, then income adjustments will always ensure the government fiscal balance is in deficit.

Answer: True

• 3. Estimates of structural fiscal deficits published the multilateral agencies such as the IMF and the OECD are to be treated with suspicion because they are based on excessively optimistic estimates of potential GDP.

Answer: False