Quiz #580

• 1. In a fixed coupon government bond auction, the higher is the demand for the bonds:
• the lower the yields will be at that asset maturity but this tells us nothing about the effect of fiscal deficits on short-term interest rates.
• the lower the yields will be at that asset maturity which suggests that higher fiscal deficits will eventually drive short-term interest rates down.
• the higher the yields will be at that asset maturity which suggests that higher fiscal deficits will eventually drive short-term interest rates down.
• 2. The more public debt a currency-issuing government voluntarily issues:
• the less is the volume of funds in the non-government sector that can be used for other investments.
• the greater is non-government wealth held in the form of public debt.
• the more difficult it is for banks to attract deposits to initiate loans from.
• 3. A fiscal deficit that is equivalent to 5 per cent of GDP always signals a more expansionary fiscal intent from government than a fiscal deficit outcome that is equivalent to 3 per cent of GDP.
• False
• True
• Maybe

Quiz #580 answers

• 1. In a fixed coupon government bond auction, the higher is the demand for the bonds:

Answer: the lower the yields will be at that asset maturity but this tells us nothing about the effect of fiscal deficits on short-term interest rates.

• 2. The more public debt a currency-issuing government voluntarily issues:

Answer: the greater is non-government wealth held in the form of public debt.

• 3. A fiscal deficit that is equivalent to 5 per cent of GDP always signals a more expansionary fiscal intent from government than a fiscal deficit outcome that is equivalent to 3 per cent of GDP.

Answer: False