Quiz #64 answers

• 1. In a fiat monetary system (for example, US or Australia) with an on-going external deficit, if you desire the domestic private sector to reduce its overall debt levels without employment losses, then you have to support the national government continually increasing the budget deficit in line with the private de-leveraging process.

Answer: Maybe

• 2. Sovereign funds do not store budget surpluses as national savings. They just account for assets that the government has bought in the same way that the property records of, say, the public schools and hospitals record holdings of other public assets accumulated through government spending.

Answer: True

• 3. The massive build-up of Chinese holdings of US government debt has allowed US citizens to enjoy a higher material standard of living at the expense of the residents of China.

Answer: True

• 4. Short-term interest rates are set by the central bank while the fiscal strategy manifests in tax and spending decisions by the government. Whereas the private sector cannot directly influence the interest rate target being set it can determine the size of the budget deficit at any point in time.

Answer: True

• 5. If employment growth matches the pace of growth in the civilian population (people above 15 years of age) then the economy will experience a constant unemployment rate as long as participation rates do not change.

Answer: True