Quiz #648 answers

• 1. Over the last several decades, central banks and treasuries have used the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) to define full employment and calibrate their estimates of the state of the economic cycle. Accordingly, these estimates will typically be:

Answer: biased upwards indicating they think that the economy is closer to full employment than it actually is.

• 2. When a sovereign government issues debt it logically:

Answer: has no impact on the overall holdings of assets held by the non-government sector $-for-$.

• 3. Only one of the following statements can be true when you observe rising government bond yields for new issues:

Answer: Bond prices are falling in response to demand.