Quiz #621 answers

• 1. For a nation running a current account deficit, national income adjustments will ensure the government fiscal position is in deficit no matter what the government's intentions are if the private domestic sector is spending less than its income.

Answer: True

• 2. It would be impossible for a government to avoid issuing debt to the non-government sector when running a fiscal deficit while the central bank was targeting a positive short-term policy rate.

Answer: False

• 3. EMU member nations face solvency risk because they do not issue their own currency. This source of risk would not be eliminated if these nations exited the Eurozone and re-established their currency sovereignty - that is, issued their own floating currency.

Answer: True