Quiz #706

• 1. If the government increases its fiscal deficit as a percentage of GDP it will squeeze the real resources available for private productive uses.
• True
• False
• 2. For a nation running a current account deficit, national income adjustments will ensure government's fiscal position is in deficit no matter what the government's intentions are if the private domestic sector is spending less than its income.
• True
• False
• 3. Specific legal considerations aside, it would be impossible for a government to avoid issuing debt to the private sector when running a fiscal deficit while the central bank was targeting a positive short-term policy rate.
• True
• False

Quiz #706 answers

• 1. If the government increases its fiscal deficit as a percentage of GDP it will squeeze the real resources available for private productive uses.

Answer: True

• 2. For a nation running a current account deficit, national income adjustments will ensure government's fiscal position is in deficit no matter what the government's intentions are if the private domestic sector is spending less than its income.

Answer: True

• 3. Specific legal considerations aside, it would be impossible for a government to avoid issuing debt to the private sector when running a fiscal deficit while the central bank was targeting a positive short-term policy rate.

Answer: False