Quiz #426

• 1. The Australian Treasury like many official agencies equates the Non-Accelerating Inflation Rate of Unemployment (NAIRU) with full employment and uses this to calibrate their structural deficit estimates. Accordingly, the structural deficits will typically be:
• Difficult to assess because the Treasury forward estimates are subject to forecasting inaccuracy.
• Biased downwards
• Biased upwards
• 2. Under a fiat monetary system, the absence of currency convertibility means that:
• the currency is only convertible into government bonds rather than gold
• government can motivate people to exchange labour for public spending by fining anyone who walks down the street.
• there is no reason for people to hold currency as a hedge against gold price falls.
• 3. The act of issuing debt by a sovereign government logically:
• reduces the capacity of the private sector to borrow from banks because they use their deposits to buy the bonds.
• has no immediate impact on the overall holdings of assets held by the non-government sector $-for-$
• increases the assets that are held by the non-government sector $-for-$.

Quiz #426 answers

• 1. The Australian Treasury like many official agencies equates the Non-Accelerating Inflation Rate of Unemployment (NAIRU) with full employment and uses this to calibrate their structural deficit estimates. Accordingly, the structural deficits will typically be:

Answer: Biased upwards

• 2. Under a fiat monetary system, the absence of currency convertibility means that:

Answer: government can motivate people to exchange labour for public spending by fining anyone who walks down the street.

• 3. The act of issuing debt by a sovereign government logically:

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