Quiz #97 answers

• 1. A fact that is overlooked by those promoting austerity programs, is that when economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion to ensure that the government budget balance returns to its appropriate level.

Answer: False

• 2. From a monetary perspective, it would be impossible for a central bank to directly purchase Treasury debt to facilitate a national government's budget deficit while still targeting a non-zero policy rate.

Answer: False

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

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

• 4. Rising government bond yields for new issues indicate:

Answer: (f) Answers (b) and (d) depending on the situation.

• 5. Premium question: If private households and firms decide to lift their saving ratio the national government has to increase its net spending (deficit) to fill the spending gap or else economic activity will slow down.

Answer: False