Question #309

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

• 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.
• difficult to assess because the Treasury forward estimates are subject to forecasting inaccuracy.

Answer #2152

Answer: biased upwards thus indicating, at any point in the business cycle, that the government fiscal stance is more expansionary than it actually is.

Explanation

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