Quiz #73 answers

• 1. Larger fiscal deficits as a percentage of GDP typically mean that there are less real resources available for other productive uses.

Answer: True

• 2. For a nation running a current account deficit, income adjustments will ensure government budget is in deficit if the domestic private sector seeks to increase its saving overall as a percentage of GDP.

Answer: True

• 3. Higher levels of taxation permit the government to spend more.

Answer: True

• 4. If the central bank pays a positive interest rate on overnight reserves then it no longer has to conduct open market operations to ensure its policy rate is sustained (ignore any reserve requirements).

Answer: Maybe

• 5. The payment of a positive return on overnight reserves held by the commercial banks equal to the current policy rate will tend increase the overall level of reserves held by the latter (ignore any reserve requirements).

Answer: True