Quiz #413 answers

• 1. Central banks provide reserves to the commercial banking system usually at some penalty rate. However, this compromises their capacity to target a given monetary policy rate.

Answer: True

• 2. If inflation is stable and the central bank holds the nominal interest rate constant, then a currency-isuing government, which matches its net spending $-for-$ with debt issuance, could double its fiscal deficit without pushing up the public debt ratio.

Answer: True

• 3. If Greece could achieve positive net exports (the strategy of the Troika), then it could could push for a primary fiscal surplus knowing it will not compromise growth.

Answer: False