Quiz #634

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would find
• A fiscal deficit
• A fiscal surplus
• Cannot determine because we would need to know the scale of the private domestic sector saving as a % of GDP
• 2. Government bonds constitute non-government financial wealth. Accordingly, non-government net worth immediately rises if the government issues new bonds to match its deficit spending.
• False
• True
• 3. A government wanting to achieve full employment after a deep recession will succeed if it uses discretionary fiscal policy to ensure real GDP growth gets back on trend.
• False
• True

Quiz #634 answers

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would find

Answer: A fiscal deficit

• 2. Government bonds constitute non-government financial wealth. Accordingly, non-government net worth immediately rises if the government issues new bonds to match its deficit spending.

Answer: False

• 3. A government wanting to achieve full employment after a deep recession will succeed if it uses discretionary fiscal policy to ensure real GDP growth gets back on trend.

Answer: False