Quiz #486

• 1. The value of money inevitably declines if the money supply rises.
• False
• True
• 2. Economists note that the automatic stabilisers in-built into government fiscal policy increase deficits (or reduce surpluses) in times of slack aggregate demand. This sensitivity of the fiscal outcome to the economic cycle would not be eliminated if the government followed a fiscal rule such that it had to balance its fiscal outcome at all times.
• False
• True
• 3. One advantage of low inflation is that the central bank can better use balance sheet management techniques to control yields on public debt at certain targetted maturities.
• False
• True

Quiz #486 answers

• 1. The value of money inevitably declines if the money supply rises.

Answer: False

• 2. Economists note that the automatic stabilisers in-built into government fiscal policy increase deficits (or reduce surpluses) in times of slack aggregate demand. This sensitivity of the fiscal outcome to the economic cycle would not be eliminated if the government followed a fiscal rule such that it had to balance its fiscal outcome at all times.

Answer: True

• 3. One advantage of low inflation is that the central bank can better use balance sheet management techniques to control yields on public debt at certain targetted maturities.

Answer: True