Quiz #488 answers

• 1. If we observe rising yields on 10-year government bond yields then we can safely conclude that bond investors are demanding increased risk premiums for these assets.

Answer: False

• 2. If a nation that is running an on-going external deficit is to avoid a recession, then the government spending (relative to taxation) has to rise if the household saving ratio rises.

Answer: False

• 3. While a currency-issuing government does not have to issue debt to fund its deficit spending, the debt-issuance does reduce the inflation risk associated with the deficits.

Answer: False