Quiz #178 answers

• 1. A currency-issuing government can always ensure there is first-class services to meet the demands of an ageing population.

Answer: False

• 2. The rate the central banks charge commercial banks for any reserves it provides to them is dependent on the target policy rate the central bank sets.

Answer: True

• 3. Introducing a system of 100 per cent reserve requirements on the banks will restore the central bank's capacity to control the money supply.

Answer: False

• 4. For a nation running a small current account deficit (close to balance), the government budget will always be in deficit if the domestic private sector is spending less than it earns.

Answer: True

• 5. Premium Question: Ignoring laws to the contrary, a central bank currently targetting a 2 per cent short-term policy rate, cannot directly purchase treasury debt to facilitate the national governments budget deficit (that is, "monetise the deficit") and continue to maintain its policy rate at 2 per cent.

Answer: False