Quiz #663

• 1. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.
• False
• True
• 2. A public employment guarantee program, which required workers to attend a government centre each day and do jigsaw puzzles, will have the same impact on national income as when a private company hired workers to build cars to meet market demand and are paid an equivalent wage.
• False
• True
• 3. A fiscal deficit of 2 per cent of GDP is less expansionary than a deficit of 3 per cent of GDP.
• True
• We would need to know the structural and cyclical components to answer this question.
• False

Quiz #663 answers

• 1. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.

Answer: False

• 2. A public employment guarantee program, which required workers to attend a government centre each day and do jigsaw puzzles, will have the same impact on national income as when a private company hired workers to build cars to meet market demand and are paid an equivalent wage.

Answer: True

• 3. A fiscal deficit of 2 per cent of GDP is less expansionary than a deficit of 3 per cent of GDP.

Answer: True