Quiz #8 answers

• 2. If the central bank offered no return on overnight bank reserves then

Answer: running budget deficits would drive overnight interest rates down to zero.

Explanation: Please read The interest rate should be set to zero or post a comment for further discussion

• 1. If the central bank set the interest rate to zero then

Answer: investment rates would reflect risk.

Explanation: Please read Interest rates should be set to zeo or post a comment for further discussion

• 3. It is inevitable that public debt will rise in Australia under current circumstances given

Answer: that the federal government has voluntarily imposed a rule that it will match all net spending fully with market-based debt issues.

Explanation: Please read Federal budget 2009 - ignorance will drive bad policy or post a comment for further discussion

• 4. The Australian economy has in net terms generated 62.2 thousand jobs since February 2008, but unemployment rate has risen from 3.9 per cent to its current 5.4 per cent. This is because

Answer: the federal government deficit has not been large enough over the period.

Explanation: Please read A surprise every day employment rises! or post a comment for further discussion

• 5. The largest reason why China has grown so fast in the period 2004-2008 has been

Answer: the strength of its government spending.

Explanation: Please read Where the crisis means death! or post a comment for further discussion