Quiz #37

• 1. Central banks (for example, US Federal Reserve, Reserve Bank of Australia, and the Central Bank of Ireland) conduct monetary policy by setting the short-run interest rate rather than trying to control the money supply which is endogenous.
• False
• True
• 2. An economist who believed in Ricardian Equivalence would argue that the boost of retail sales in Australia following the December stimulus package had nothing to do with the $900 cash handout. Households would have merely saved the handout to pay for future tax rises.
• False
• True
• 3. When the German constitutional requirement that the federal budget be balanced at all times comes into force, fiscal policy will become pro-cyclical and destabilising.
• False
• True
• 4. The reason estimates of structural budget deficits are to be treated with suspicion relates to the fact that typically the implicit estimates of potential GDP are too optimistic.
• False
• True
• 5. The introduction of an employment guarantee where the federal government offers a minimum wage job to anyone who wanted one would require a modest increase in the budget deficit but there would never be a question that a sovereign government could not afford this program.
• False
• True