Quiz #438 answers

• 1. A central bank sets the short-run interest rate and can choose to pay any rate on excess reserves to the commercial banks that it chooses.

Answer: False

• 2. The Australian dollar has appreciated recently against many key currencies. This has squeezed some of export industries (such as manufacturing) which are not enjoying a commensurate growth in world demand for their products. A cut in real wages is needed to restore international competitiveness in the industries that are under pressure.

Answer: False

• 3. If the nation is running a current account deficit of 2 per cent of GDP and the government runs a surplus equal to 2 per cent of GDP, then we know that at the current level of GDP, the private domestic sector is spending less than it is earning.

Answer: False