Quiz #495

• 1. The IMF use their estimates of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) to calibrate their structural deficit estimates. Accordingly, the structural deficits will typically be:
• difficult to assess because their forecasts are highly inaccurate
• biased downwards.
• biased upwards.
• 2. Under a fiat monetary system, the absence of currency convertibility means that:
• the currency is only convertible into government bonds rather than gold.
• government can induce us to offer goods and services in return for public spending by fining us for walking down streets.
• there is no reason for people to hold currency as a hedge against gold price falls.
• 3. Only one of the following statements can be true when you observe rising government bond yields for new issues:
• Government spending is becoming more expensive.
• Bond prices are falling in response to demand.
• Government spending is increasing the cost of borrowing for private investors.

Quiz #495 answers

• 1. The IMF use their estimates of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) to calibrate their structural deficit estimates. Accordingly, the structural deficits will typically be:

Answer: biased upwards.

• 2. Under a fiat monetary system, the absence of currency convertibility means that:

Answer: government can induce us to offer goods and services in return for public spending by fining us for walking down streets.

• 3. Only one of the following statements can be true when you observe rising government bond yields for new issues:

Answer: Bond prices are falling in response to demand.