Quiz #688

• 1. When a currency-issuing government voluntarily constrains itself ensure any fiscal deficits are matched by borrowing from the private sector, it reduces the funds available for private investment expenditure.
• False
• True
• 2. An increasing fiscal deficit tells us nothing about the government's policy intentions.
• False
• True
• 3. The crucial difference between a monetary system based on the convertible currency backed by gold and a fiat currency monetary is that under the former system:
• The national government could not use net spending to achieve full employment.
• The national government had to issue debt to cover spending above taxation.
• Excessive national government spending led to inflation.
• None of the above.

Quiz #688 answers

• 1. When a currency-issuing government voluntarily constrains itself ensure any fiscal deficits are matched by borrowing from the private sector, it reduces the funds available for private investment expenditure.

Answer: False

• 2. An increasing fiscal deficit tells us nothing about the government's policy intentions.

Answer: True

• 3. The crucial difference between a monetary system based on the convertible currency backed by gold and a fiat currency monetary is that under the former system:

Answer: The national government had to issue debt to cover spending above taxation.