Quiz #393

• 1. When the IMF and the OECD talk about structural fiscal deficits, you know their estimates are:
• biased downwards thus indicating that the government fiscal stance is less expansionary than it actually is.
• biased upwards thus indicating that the government fiscal stance is more expansionary than it actually is.
• difficult to assess because their forecasts are subject to forecasting inaccuracy.
• 2. When a sovereign government issues debt it logically:
• increases the financial assets that are held by the non-government sector $-for-$.
• has no impact on the overall holdings of financial assets held by the non-government sector $-for-$.
• reduces the capacity of the private sector to borrow from banks because they use their deposits to buy the bonds.
• 3. Historically, government debt has been used by central banks to manage liquidity and sustain positive short-term policy interest rates targets. This function necessitates that currency-issuing governments continue to, at least, issue enough debt to allow these open market operations to continue.
• False
• True

Quiz #393 answers

• 1. When the IMF and the OECD talk about structural fiscal deficits, you know their estimates are:

Answer: biased upwards thus indicating that the government fiscal stance is more expansionary than it actually is.

• 2. When a sovereign government issues debt it logically:

Answer: has no impact on the overall holdings of financial assets held by the non-government sector $-for-$.

• 3. Historically, government debt has been used by central banks to manage liquidity and sustain positive short-term policy interest rates targets. This function necessitates that currency-issuing governments continue to, at least, issue enough debt to allow these open market operations to continue.

Answer: False