Quiz #67 answers

• 1. The private domestic sector can save overall even if the government budget balance is in surplus as long as net exports are positive.

Answer: False

• 2. Central bankers are talking about the possible need for more quantitative easing to ease the aggregate demand losses associated with the implementation of fiscal austerity programs. However QE cannot be compared to a net fiscal injection because it creates no new net financial assets in the currency of issue.

Answer: True

• 3. The expansionary impact of deficit spending on aggregate demand is lower when the government matches the deficit with debt-issuance because then excess reserves are drained and the purchasing power is taken out of the monetary system.

Answer: False

• 4. The change in the net worth of the non-government sector when the government increases its net spending is invariant to government issuing debt $-for-$ to match the net spending rise.

Answer: True

• 5. While continuous national governments deficits are possible if the non-government sector desires to save, they do imply continuously rising public debt levels as a percentage of GDP.

Answer: False