Quiz #693

• 1. When economic growth resumes, the automatic stabilisers work to reduce government spending and increase taxes, which ensures that the government fiscal balance returns to its appropriate level.
• True
• False
• 2. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):
• A nation can run a external deficit accompanied by a government sector surplus of equal size, while the private domestic sector is spending less than they are earning.
• A nation can run a external deficit accompanied by a government sector surplus of equal size, while the private domestic sector is spending more than they are earning.
• A nation can run a external deficit accompanied by a government sector surplus that is larger, while the private domestic sector is spending less than they are earning.
• None of the above are possible as they all defy the sectoral balances accounting identity.
• 3. Broad money is a multiple of the monetary base which is what the money multiplier concept explains.
• True
• False

Quiz #693 answers

• 1. When economic growth resumes, the automatic stabilisers work to reduce government spending and increase taxes, which ensures that the government fiscal balance returns to its appropriate level.

Answer: False

• 2. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):

Answer: A nation can run a external deficit accompanied by a government sector surplus of equal size, while the private domestic sector is spending more than they are earning.

• 3. Broad money is a multiple of the monetary base which is what the money multiplier concept explains.

Answer: False