Quiz #387 answers

• 1. Central banks provide reserves to the commercial banking system at some penalty rate. However, by standing ready to act as the lender of last resort to the commercial banks, the central bank's capacity to control bank lending and target a given monetary policy rate is compromised.

Answer: True

• 2. If inflation is stable and maintained at a rate equal to the interest rate, then the government deficit as a proportion of GDP could double (say from 2 to 4 per cent) without pushing up the public debt ratio.

Answer: True

• 3. The wage share in national income in many nations has fallen over the neo-liberal period. However, a declining wage share does not mean the real standard of living for workers is falling.

Answer: True