Quiz #15 answers

• 1. Japan was able to keep interest rates at zero for 15 or more years because

Answer: the Bank of Japan did not issue enough bonds to fully drain the reserves added by the large daily fiscal deficits.

Explanation: Please read More back to fiat monetary system basics! for more information or post a comment if you are unsure.

• 2. Taxation revenue will rise as the budget deficits rise because

Answer: the higher net spending increases economic activity and more people become employed.

Explanation: Please read The budget deficits will increase taxation! for more information or post a comment if you are unsure.

• 3. The government deficits may ultimately lead to higher tax rates being imposed

Answer: if nominal demand increases too fast in relation to the real capacity levels.

Explanation: Please read The budget deficits will increase taxation! for more information or post a comment if you are unsure.

• 4. The German fiscal rule to ban deficits and run balanced budgets would work

Answer: if desired non-government saving was always zero.

Explanation: Please read Fiscal rules going mad for more information or post a comment if you are unsure.

• 5. If the economy has unemployed workers but cannot produce any more real output then the government

Answer: has to raise taxation if it wants to achieve full employment.

Explanation: Please read Bad luck if you are poor! for more information or post a comment if you are unsure.