Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern…
Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following five questions. Your results are only known to you and no records are retained.
- 1. The Australian Treasury equates the Non-Accelerating Inflation Rate of Unemployment (NAIRU) with full employment and uses this to calibrate their structural deficit estimates. Accordingly, the structural deficits will typically be:
- difficult to assess because the Treasury forward estimates are subject to forecasting inaccuracy.
- biased downwards thus indicating, at any point in the business cycle, that the government fiscal stance is less expansionary than it actually is.
- biased upwards thus indicating, at any point in the business cycle, that the government fiscal stance is more expansionary than it actually is.
- 2. Rising public debt levels at constant interest rates increase the volume of interest servicing payments that have to be made. These payments will:
- not reduce the room $-for-$ for other non-inflationary discretionary deficit spending because increasing imports will keep opening the spending gap that has to be "filled".
- reduce the capacity of the private sector to save because they will require cuts backs in the deficit to support the repayments.
- reduce the room $-for-$ for other non-inflationary discretionary deficit spending because they will "fill up the spending gap" more quickly.
- 3. Under a fiat monetary system, the absence of currency convertibility means:
- there is no reason for people to hold currency as a hedge against gold price falls.
- that the government can motivate people to exchange goods and services in return for public spending by fining anyone of working age who walks down the street.
- that the currency is only convertible into government bonds rather than gold.
- 4. When a sovereign government issues debt it logically:
- reduces the capacity of the private sector to borrow from banks because they use their deposits to buy the bonds.
- has no impact on the overall holdings of assets held by the non-government sector $-for-$
- increases the assets that are held by the non-government sector $-for-$.
- 5. Rising government bond yields for new issues indicate:
- that government spending is increasing the cost of borrowing for private investors.
- that bond prices are falling in response to demand.
- that government spending is becoming more expensive.
Sorry, quiz 62 is now closed.
You can find the answers and discussion here