Question

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QUESTION 12 If inflation is too high, the RBA will the RBA can intervene via open market (up/ down), especially at its convincing market participants that the new cash rate target will be somewhat change in nominal interest rates is also affecting the real interest rate if prices are change in real interest rates will cause businesses and households to inflation. (increase/ decrease) its cash rate target. If the actual cash rate remains below the target, (purchases /sales of bonds. The yield curve is likely to shift (short /long) end. The impact on the long end of the yield curve can be strengthened by (temporary/permanent). The described (somewhat sticky / totally flexible). The (cut back/increase) their spendings and thus dampen

Answer 1

Answer

1.If inflation is too high RBA would increase the cash rate target to bring inflation back to target.

2.If cash rate remain below the target RBA can intervene via open market to purchase bond because to have public more with more money and Therefore more money in economy.

3.In normal condition yield curve shift up .The added risk prompts investors to seek higher returns from longer-term bonds, leading to an upward-sloping yield curve.in long end.

4.The impact on long end of yield curve can be strengthened by convincing market participants that the new cash target will be some what permanent because long end of the curve reflect the influence of various economic factors that are not limited to the single economy.

5.nominal interest rate  are consistent with the private sector's expectations of lower inflation rates in the future. Accordingly, nominal interest rates are increased to raise real interest rates, which leads to lower aggregate demand and if prices are flexible.

6.The change in real interest rate will cause bussiness and households to cut back theur spendings and thus dampen inflation.As real rate interest rates are reduced, more people are able to borrow more .The opposite holds true for rising interest rates.