You are representing the RBA and noted that the cash rate is higher than the RBA...
You are representing the RBA and noted that the cash rate is higher than the RBA target cash rate.
- The RBA should advise the banks to lend to each other at the agreed target cash rate.
- There is nothing that the RBA can do about this situation because the central bank is independent of the government.
-The RBA should sell bonds and thereby push more ESF into the banking system to reduce the pressure in the interbank market.
-The RBA should buy bonds and thereby push more ESF into the banking system to reduce the pressure in the interbank market.
Homework Answers
The Answer will be last one - The RBA should buy bonds and thereby push more ESF into the banking system to reduce the pressure in the interbank market.
It is because interest rate is always most important point for any monetary policy. Out of different type of interest rates, Cash rate will be always in focus. it can be also defined by Interbank rate.
Any sale of government bonds or foreign currency will result in decrease in monetary base hence it will increase the Cash Rate.
So in given situation, Cash rate is higher than expected so RBA should buy bond or foreign currency to increase its monetary base and that will result in reduction in Cash Rate.
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You are representing the RBA and noted that the cash rate is
higher than the RBA...
Multiple choice question QUESTION 6 You are representing the RBA and noted that the cash rate...
Multiple choice question
QUESTION 6 You are representing the RBA and noted that the cash rate is higher than the RBA target cash rate. The RBA should buy bonds and thereby push more ESF into the banking system to reduce the pressure in the interb There is nothing that the RBA can do about this situation because the central bank is independent of the governmen The RBA should advise the banks to lend to each other at the agreed target...
QUESTION 4 Which of the following statements does describe the "cash rate" most accurately? The cash...
QUESTION 4 Which of the following statements does describe the "cash rate" most accurately? The cash rate is the interest rate that the RBA charges banks for unsecured overnight loans. The cash rate is the interest rate that banks charge each other for unsecured overnight loans The cash rate is the interest rate that the RBA charges banks for secured overnight loans. The cash rate is the interest rate that banks charge each other for secured overnight loans. QUESTION 5...
Multiple choice question QUESTION 4 Which of the following statements does describe the "cash rate" most...
Multiple choice question
QUESTION 4 Which of the following statements does describe the "cash rate" most accurately? The cash rate is the interest rate that the RBA charges banks for unsecured overnight loans. The cash rate is the interest rate that banks charge each other for unsecured overnight loans The cash rate is the interest rate that the RBA charges banks for secured overnight loans. The cash rate is the interest rate that banks charge each other for secured overnight...
You are the bank's liquidity manager. What should you do if the RBA increased the cash...
You are the bank's liquidity manager. What should you do if the RBA increased the cash rate (overnight interbank borrowing) and why? Answer this question by filling in the blanks. Please use the suitable word provided in the round brackets. The risk of illiquidity (increased/decreased/did not change). The cost of illiquidity (increased/decreased/did not change). Therefore it makes sense to (increase/decrease/ maintain) the ESF buffer. As a result your bank will be willing to create (more/less/the same) loans and deposits.
QUESTION 8 An Repo implies that the "lender" receives a security for the time of the...
QUESTION 8 An Repo implies that the "lender" receives a security for the time of the "loan". Since the RBA accepts only high quality securities, this makes the Repo risk-free. Despite the low risk, the RBA usually charges more than the interbank rate because of the long duration of overnight loans. Despite the low risk, the RBA usually charges more than the interbank rate in order to deter banks from requesting an overnight ESF loan from the RBA Despite the...
QUESTION 5 You are the bank's liquidity manager. What should you do if the RBA increased...
QUESTION 5 You are the bank's liquidity manager. What should you do if the RBA increased the cash rate (overnight interbank borrowing) and why? Answer this question by filling in the blanks. Please use the suitable word provided in the round brackets The risk of illiquidity (increased/decreased/did not change). The cost of illiquidity (increased/decreased/did not change). Therefore it makes sense to (increase/decrease/ maintain) the ESF buffer. As a result your bank will be willing to create (more/less/the same) loans and deposits.
If inflation is too high, the RBA will __________ (increase / decrease) its cash rate target....
If inflation is too high, the RBA will __________ (increase / decrease) its cash rate target. If the actual cash rate remains below the target, the RBA can intervene via open market _____________ (purchases / sales] of bonds. The yield curve is likely to shift __________ (up / down), especially at its ___________ (short / long) end. The impact on the long end of the yield curve can be strengthened by convincing market participants that the new cash rate target...
You are the bank manager and currently the cash rate is very high. - You should...
You are the bank manager and currently the cash rate is very high. - You should NOT own a relative large amount of ESF because you can borrow it on short notice cheaply. - You should borrow a relative large amount of ESF now to be prepared for a liquidity shortage in the future. - You should own a relative large amount of ESF and keep it on your ESA (exchange settlement account) in case of a liquidity shortage. -You...
QUESTION 12 If inflation is too high, the RBA will (increase / decrease) its cash rate...
QUESTION 12 If inflation is too high, the RBA will (increase / decrease) its cash rate target. If the actual cash rate remains below the target, the RBA can intervene via open market sales ー ーーー ーー ーーー ーー ーーー ーーー ー (purchases / sales] of bonds. The yield curve is likely to shit (up / down), especially at its end The impact on the long end of the yield curve can be strengthened by convincing market (short/long) participants that...
If the Fed increases the discount rate, then Key Bank will increase its reserves. decrease its...
If the Fed increases the discount rate, then Key Bank will increase its reserves. decrease its reserves. make more loans. A contractionary or tight monetary policy stimulates borrowing. reduces borrowing. lowers interest rates. Which of the following is an inaccurate statement about the banking system? Banks borrow from households in order to lend to investors. Banks are the critical link in the flow of capital from households to investors. Competition between private banks and the central bank is what limits...
Multiple choice question
QUESTION 6 You are representing the RBA and noted that the cash rate is higher than the RBA target cash rate. The RBA should buy bonds and thereby push more ESF into the banking system to reduce the pressure in the interb There is nothing that the RBA can do about this situation because the central bank is independent of the governmen The RBA should advise the banks to lend to each other at the agreed target...
QUESTION 4 Which of the following statements does describe the "cash rate" most accurately? The cash rate is the interest rate that the RBA charges banks for unsecured overnight loans. The cash rate is the interest rate that banks charge each other for unsecured overnight loans The cash rate is the interest rate that the RBA charges banks for secured overnight loans. The cash rate is the interest rate that banks charge each other for secured overnight loans. QUESTION 5...
Multiple choice question
QUESTION 4 Which of the following statements does describe the "cash rate" most accurately? The cash rate is the interest rate that the RBA charges banks for unsecured overnight loans. The cash rate is the interest rate that banks charge each other for unsecured overnight loans The cash rate is the interest rate that the RBA charges banks for secured overnight loans. The cash rate is the interest rate that banks charge each other for secured overnight...
QUESTION 8 An Repo implies that the "lender" receives a security for the time of the "loan". Since the RBA accepts only high quality securities, this makes the Repo risk-free. Despite the low risk, the RBA usually charges more than the interbank rate because of the long duration of overnight loans. Despite the low risk, the RBA usually charges more than the interbank rate in order to deter banks from requesting an overnight ESF loan from the RBA Despite the...
QUESTION 5 You are the bank's liquidity manager. What should you do if the RBA increased the cash rate (overnight interbank borrowing) and why? Answer this question by filling in the blanks. Please use the suitable word provided in the round brackets The risk of illiquidity (increased/decreased/did not change). The cost of illiquidity (increased/decreased/did not change). Therefore it makes sense to (increase/decrease/ maintain) the ESF buffer. As a result your bank will be willing to create (more/less/the same) loans and deposits.
QUESTION 12 If inflation is too high, the RBA will (increase / decrease) its cash rate target. If the actual cash rate remains below the target, the RBA can intervene via open market sales ー ーーー ーー ーーー ーー ーーー ーーー ー (purchases / sales] of bonds. The yield curve is likely to shit (up / down), especially at its end The impact on the long end of the yield curve can be strengthened by convincing market (short/long) participants that...
If the Fed increases the discount rate, then Key Bank will increase its reserves. decrease its reserves. make more loans. A contractionary or tight monetary policy stimulates borrowing. reduces borrowing. lowers interest rates. Which of the following is an inaccurate statement about the banking system? Banks borrow from households in order to lend to investors. Banks are the critical link in the flow of capital from households to investors. Competition between private banks and the central bank is what limits...
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