1. When there is an external deficit, the private domestic sector can reduce its overall indebtedness as long as the government runs a fiscal deficit.

Answer: False

2. When a sovereign government issues debt to match its fiscal deficit it has no impact on the overall holdings of financial assets held by the non-government sector.

Answer: True

3. When 10-year government bond yields rise you know that bond markets are demanding increased risk coverage for these assets.

Answer: False