Quiz #635

• 1. A sovereign national government can run a balanced fiscal position over the economic cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus when averaged out over the same cycle.
• False
• True
• 2. An understanding of Modern Monetary Theory (MMT) allows us to understand that mass unemployment can arise if the growth in real wages are excessive.
• False
• True
• 3. Only one of the following statements is definitely true when you observe rising government bond yields for new issues:
• Government spending is becoming more expensive.
• Bond prices are falling in response to falling demand.
• Government spending is increasing the cost of borrowing for private investors.

Quiz #635 answers

• 1. A sovereign national government can run a balanced fiscal position over the economic cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus when averaged out over the same cycle.

Answer: True

• 2. An understanding of Modern Monetary Theory (MMT) allows us to understand that mass unemployment can arise if the growth in real wages are excessive.

Answer: True

• 3. Only one of the following statements is definitely true when you observe rising government bond yields for new issues:

Answer: Bond prices are falling in response to falling demand.