Quiz #4

• If the unemployment rate is rising it means
• that there are more people without jobs than in the previous period.
• as a percentage of the available labour force more people are without jobs.
• that there are fewer jobs available than in the previous period.
• The comment that budget deficits lead to higher taxation is
• generally false because in the case of sovereign governments because they do not need to raise taxes to finance spending.
• generally true because revenue has to be raised ultimately to pay for the deficit spending and that requires individual tax burdens to rise.
• generally true if the deficit stimulates output but doesn't mean current individual tax burdens are higher.
• Even though a sovereign government doesn't have to "finance" its spending, if it issues debt to the private sector
• it will push up interest rates because there is only a finite amount of savings available at any time to buy the bonds.
• it will not push up interest rates because budget deficits put downward pressure on rates and bond sales just maintain them at their previous rate.
• it will push up interest rates if the government makes a decision that they should be higher either through direct central bank intervention or through voluntary debt issuing arrangements that allow this.
• When the government borrows from the non-government sector it eventually has to pay the bonds back on maturity. This will
• be inflationary if the government payments to bond holders at maturity add more to nominal aggregate demand than the real economy can support given other policy settings.
• be inflationary if by the time the bonds mature the economy is growing strongly so there will be too much money floating about.
• not be inflationary because the sovereign government just has to credit the bank accounts of those who hold the bonds to repay them.
• Introducing more sophisticated training programs for unemployed workers during a recession
• is an ineffective strategy because it doesn't take into account employer prejudices.
• is an ineffective strategy because even if it increases individual productivity it just shuffles the jobless queue.
• is an effective strategy because the workers become more productive and are hence more attractive to employers.

Quiz #4 answers

• If the unemployment rate is rising it means

Answer: as a percentage of the available labour force more people are without jobs.

Explanation: You might like to read for further information or request an explanation via the comments.

• The comment that budget deficits lead to higher taxation is

Answer: generally true if the deficit stimulates output but doesn't mean current individual tax burdens are higher.

Explanation: You might like to read for further information or request an explanation via the comments.

• Even though a sovereign government doesn't have to "finance" its spending, if it issues debt to the private sector

Answer: it will push up interest rates if the government makes a decision that they should be higher either through direct central bank intervention or through voluntary debt issuing arrangements that allow this.

Explanation: You might like to read for further information or request an explanation via the comments.

• When the government borrows from the non-government sector it eventually has to pay the bonds back on maturity. This will

Answer: be inflationary if the government payments to bond holders at maturity add more to nominal aggregate demand than the real economy can support given other policy settings.

Explanation: You might like to read for further information or request an explanation via the comments.

• Introducing more sophisticated training programs for unemployed workers during a recession

Answer: is an ineffective strategy because even if it increases individual productivity it just shuffles the jobless queue.

Explanation: You might like to read for further information or request an explanation via the comments.