Quiz #566

• 1. A fact that is overlooked by those promoting austerity programs, is that when economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion and ensure that the government fiscal balance returns to its appropriate level.
• False
• True
• 2. From a monetary perspective, it would be impossible for a central bank to directly purchase Treasury debt to facilitate a national government's fiscal deficit while still targeting a non-zero policy rate.
• False
• True
• 3. . Rising government bond yields for new issues indicate:
• that government spending is becoming more expensive.
• that economic growth is reducing private risk assessments of alternative financial investments.
• that government spending is increasing the cost of borrowing for private investors.
• that private investors consider public debt to be riskier.
• Answers (a) and (d) depending on the situation.
• Answers (b) and (d) depending on the situation.