Quiz #542 answers

• 1. The IMF and the OECD and a range of central banks equate the Non-Accelerating Inflation Rate of Unemployment (NAIRU) with their concept of full employment and they use the NAIRU estimates to calibrate their structural deficit estimates. Accordingly, the structural deficits will typically be:

Answer: biased upwards thus indicating that the government fiscal stance is more expansionary than it actually is.

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

Answer: has no initial impact on the overall holdings of financial assets held by the non-government sector.

• 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.