Quiz #712 answers

• 1. When a government runs a continuous deficit (spending more than they are receiving in revenue), the risk is that the accumulated public spending will build up over time and cause inflation.

Answer: False

• 2. If governments allowed the automatic stabilisers built into the government balance to work counter-cyclically and avoided discretionary shifts in fiscal policy, the fiscal balance would return to its appropriate level after a cyclical disturbance.

Answer: False

• 3. If the household saving ratio rises and there is an external deficit then Modern Monetary Theory tells us that the government must increase net spending to fill the private spending gap or else national output and income will fall.

Answer: False