Quiz #68 answers

• 1. A budget deficit that is equivalent to 5 per cent of GDP always signals a more expansionary fiscal intent from government than a budget deficit outcome that is equivalent to 3 per cent of GDP.

Answer: False

• 2. Government spending which is accompanied by a bond sale to the private sector adds less to aggregate demand than would be the case if there was no bond sale.

Answer: False

• 3. If the external balance is always in surplus, then the government can safely run a surplus and not impede economic growth.

Answer: False

• 4. Assume the current public debt to GDP ratio is 100 per cent and that the nominal interest rate and the inflation rate remain constant and zero. Under these circumstances it is impossible to reduce a public debt to GDP ratio, using an austerity package if the rise in the primary surplus to GDP ratio is always exactly offset by negative GDP growth rate of the same percentage value.

Answer: True

• 5. The latest Australian Bureau of Statistics data shows that total hours worked in June 2010 fell while part-time employment (and total employment) grew. Unemployment stayed more or less constant. This signals rising underemployment.

Answer: Maybe