Question #32

There is talk that the international ratings agencies may reduce the Australian Government's triple A bond rating if the deficit gets too large which may see higher short-term interest rates. If this occurs then we can

• legitimately conclude that the rising deficit has caused borrowing costs to rise.
• legitimately conclude that the ratings agencies do not understand that the government is not financially constrained.
• legitimately conclude that the central bank has tightened monetary policy.

Answer #295

Answer: legitimately conclude that the central bank has tightened monetary policy.

Explanation

Please read Ratings agencies and higher interest rates or post a comment for further discussion