Quiz #554 answers

• 1. Organisations such as the IMF and the OECD and many central banks use the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) to estimate full capacity, which then allows them to calibrate their structural deficit estimates, which indicate the discretionary fiscal stance of the government in question. Accordingly, the structural deficits will typically be:

Answer: biased upwards

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

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

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

Answer: Bond prices are falling in response to falling demand.