Quiz #478

• 1. In a fixed coupon government bond auction, the higher is the demand for the bonds the:
• lower the yields will be at that maturity but this tells us nothing about the fiscal effect on short-term interest rates.
• lower the yields will be at that maturity, suggesting that higher fiscal deficits will soon drive short-term interest rates down.
• higher the yields will be at that maturity, suggesting that higher fiscal deficits will soon drive short-term interest rates down.
• 2. A sovereign government does not have to issue debt to match any spending above taxation. But the more public debt it voluntarily issues the more difficult it is for banks to attract deposits to initiate loans from.
• False
• True
• 3. When an external deficit and public deficit coincide, there must be a private sector deficit.
• False
• True