Quiz #554

• 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:
• biased downwards
• biased upwards
• difficult to assess because their forecasts are subject to forecasting inaccuracy.
• 2. When a sovereign government issues debt it logically:
• reduces the capacity of the private sector to borrow from banks
• has no impact on the overall holdings of financial assets held by the non-government sector $-for-$.
• increases the net financial assets that are 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:
• Government spending is becoming more expensive.
• Bond prices are falling in response to falling demand.
• Government spending is increasing the cost of borrowing for private investors.