1. Among the Australian Government debts are Benchmark Treasury Fixed Coupon Bonds on issue. There are about $A61 billion outstanding and maturing at various dates. Around $A6 billion of them mature in September 2009 and the coupon value (interest rate) is 7.5 per cent. So although the government is not financially constrained

Answer: it remains true that the debt has to be paid back but this does not require any trade-off between debt servicing and other public projects.

Explanation: Please read Lucky he's not Treasurer anymore or post a comment for further discussion

2. There is talk that the international ratings agencies may reduce the Australian Government's triple A bond rating if the deficit gets too large which may see higher short-term interest rates. If this occurs then we can

Answer: legitimately conclude that the central bank has tightened monetary policy.

Explanation: Please read Ratings agencies and higher interest rates or post a comment for further discussion

3. The Federal Government has announced a number of major infrastructure projects that it intends to fund (for example, its broadband plan and its defence plan). Their ability to implement these plans depends on

Answer: the availability of real resources suitable for use.

Explanation: Please read Lucky he's not Treasurer anymore or post a comment for further discussion

Answer: is due to the Federal budget deficit not being large enough relative to GDP.

Explanation: Please read The OECD is at it again! or post a comment for further discussion

5. Higher government deficits may drive up interest rates if bond markets begin to get short of funds. This statement is false

Answer: because the supply of treasury securities offered by the federal government is always equal to the newly created funds from the deficit.

Explanation: Please read Lucky he's not Treasurer anymore or post a comment for further discussion