Quiz #677 answers

• 1. An advantage of fiscal deficits is that the non-government sector becomes immediately wealthier because the sovereign government issues debt to private wealth holders.

Answer: False

• 2. In a fixed coupon government bond auction, the higher is the demand for the bonds the lower the yields will be at that asset maturity, which suggests that higher fiscal deficits will eventually drive short-term interest rates down.

Answer: False

• 3. In a situation where the private domestic sector decides to increase its overall saving, the economy can still grow even if the national government had decided to impose fiscal austerity.

Answer: True