Quiz #527 answers

• 1. The Australian Treasury equates the Non-Accelerating Inflation Rate of Unemployment (NAIRU) with full employment and uses this to calibrate their structural deficit estimates. Accordingly, the structural deficits reported will typically be:

Answer: biased upwards, indicating, that at any point in the business cycle, that the government fiscal stance is more expansionary than it actually is.

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

Answer: that the government can motivate people to exchange goods and services in return for public spending by fining anyone of working age who walks down the street.

• 3. When a sovereign government issues debt it logically:

Answer: has no impact on the overall holdings of assets held by the non-government sector $-for-$