Quiz #679

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would find
• Cannot determine - we would need to know the scale of private domestic sector saving as a % of GDP
• A fiscal deficit
• A fiscal surplus
• 2. Government bonds constitute non-government financial wealth. Thus, a fiscal deficit will add to non-government sector net worth only if it is accompanied by the issuance of new bonds.
• True
• False
• 3. A government wanting to achieve full employment after a deep recession will succeed if it uses discretionary fiscal policy to ensure real GDP growth gets back on trend.
• True
• False

Quiz #679 answers

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would find

Answer: A fiscal deficit

• 2. Government bonds constitute non-government financial wealth. Thus, a fiscal deficit will add to non-government sector net worth only if it is accompanied by the issuance of new bonds.

Answer: False

• 3. A government wanting to achieve full employment after a deep recession will succeed if it uses discretionary fiscal policy to ensure real GDP growth gets back on trend.

Answer: False