20 Questions
Which of the following is a feature of quantitative easing?
The central bank purchases government or private securities
What is the ultimate aim of quantitative easing?
To stimulate private sector demand
What is the concern of many economists regarding the central bank purchasing government securities on a large scale?
It monetizes the government deficit
What does the IMF model suggest happens when governments run persistently high budget deficits?
Each country's productive potential reduces
What effect does a lack of commitment to fiscal discipline have on inflation expectations and long-term interest rates?
They rise
What is the relationship between fiscal stimulus and demand in the scenario of zero interest rates and deflation?
Fiscal stimulus raises demand and inflation
What is the role of quantitative easing in major economies following the 2008-2009 Global Financial Crisis?
To substitute central bank balances for government securities
What is the fear of many economists regarding the so-called printing of money?
It monetizes the government deficit
What does the IMF model imply about the relationship between budget deficits and real interest rates?
Budget deficits increase real interest rates
What is the conventional inflation target of central banks, such as the Bank of England?
To reduce inflation
Which of the following is true about fiscal policy?
It involves government decisions about taxation and spending
What is the difference between government revenues and expenditures over a period of time called?
Government deficits
Which of the following is NOT a fiscal tool available to a government?
Monetary policy
What does the structural budget deficit indicate about a government's fiscal stance?
Its fiscal policy
If the ratio of government debt to GDP rose by 10 percentage points permanently, what would happen to world real interest rates?
They would rise by 0.14 percent
What does monetary policy refer to?
Central bank activities
How does fiscal policy affect the overall level of aggregate demand?
By increasing government spending
What is the term for the ratio of government debt to GDP?
Structural budget deficit
What would be the impact on world GDP if world real interest rates rise by 0.14 percent?
It would fall by 0.6 percent
What does the term 'fiscal stance' refer to?
Government decisions about taxation and spending
Test your knowledge on quantitative easing and policy interaction in the context of zero interest rates and deflation. Explore the impact of fiscal stimulus on demand, inflation, and real interest rates. Learn about the role of quantitative easing in major economies post the 2008-2009 Global Financial Crisis.
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