Quiz #58 answers

• 1. The payment by the central bank of a positive interest rate on overnight reserves held by the commercial banks means that the former no longer has to conduct open market operations to ensure its policy rate is sustained (ignore any reserve requirements in place when answering).

Answer: Maybe

• 2. The payment of a positive return on overnight reserves held by the commercial banks equal to the current policy rate will tend increase the overall level of reserves held by the latter (ignore any reserve requirements in place when answering).

Answer: True

• 3. The payment of a positive return on overnight reserves held by the commercial banks equal to the current policy rate will tend to increase the volume of broad money in the system (ignore any reserve requirements in place when answering).

Answer: False

• 4. A sovereign national government, that is, one that issues its own floating currency faces no solvency risk with respect to the debt it issues.

Answer: False

• 5. Taxation provides the necessary resources to a sovereign national government to allow it to maintain full employment

Answer: True