Quiz #442 answers

• 1. The statement that lending is capital-constrained rather than reserve constrained would not apply if the banks had to maintain a reserve ratio of 100 per cent.

Answer: False

• 2. A central bank can control bank lending by charging an increasing price for providing its reserves to the commercial banks while maintaining its target monetary policy rate.

Answer: False

• 3. If policy makers use the NAIRU to compute the decomposition between structural and cyclical fiscal balances, then if the estimated NAIRU is above the true full employment unemployment rate, the estimated impact of the automatic stabilisers will always be biased downwards.

Answer: True