Quiz #92 answers

• 1. Money is often considered to be currency plus demand deposits. If there is more money in the economy its value declines.

Answer: Maybe

• 2. A public works program that digs holes and fills them in again has exactly the same impact on current economic growth ($-for-$) as a private investment plan which constructs a new factory.

Answer: True

• 3. Economists note that the automatic stabilisers in the government's budget increase deficits (or reduce surpluses) in times of slack aggregate demand. This sensitivity of the budget outcome to the business cycle could be eliminated if the government followed a fiscal rule such that it had to balance its budget at all times.

Answer: False

• 4. The private and public sectors cannot both reduce their levels of indebtedness if there is an external deficit.

Answer: True

• 5. Premium Question - It is clear that the central bank can use balance sheet management techniques to control yields on public debt at certain targetted maturities. However, this capacity to control the term structure of interest rates is diminished during periods of high inflation.

Answer: True

• 6. Bonus question - The population of the North Pole is:

Answer: Bit hard to tell but Santa Claus, his partner and a few elves live there.