The Reserve Bank of Australia can increase the cash rate by: O borrowing from the banks using reverse repurchase agreements. O purchasing bonds and securities, which increases banks' reserves lending cash to banks using repurchase agreements O purchasing bonds and securities from banks.
If the Reserve Bank of Australia buys bonds and securities in the open market, this is likely to lead to a: O rise in interest rates and an appreciation of the Australian dollar. rise in interest rates and a depreciation of the Australian dollar. O fall in interest rates and an appreciation of the Australian dollar. O fall in interest rates and a depreciation of the Australian dollar.
Consider the hypothetical information in Table below for potential GDP, real GDP and the price level in 2013 if the Reserve Bank of Australia does not use monetary policy. If the RBA uses monetary policy successfully to keep real GDP at its potential level in 2013, which of the following will be lower than if the RBA had taken no action? Potential Price Year GDPReal GDP Level 2013 $1.5 trillion $1.8 rillion152 O Real GDP and the unemployment rate. Real GDP and the price level. O Real GDP and potential GDP Potential GDP and the inflation rate.
Homework Answers
lower interest rates reduce the attractiveness of the domestic
currency leading to depreciation. Depreciation of the currency
increases net exports as the currency reduces becomes relatively
cheaper.
This will reduce the funds available with the banks for lending
Due to money being injected, interest rates will reduce. Lower
interest rates reduce the attractiveness of the domestic currency
leading to depreciation.
RBA will increase the interest rate (or reduce the money supply) so
that the economy does not heat up and remains at the potential GDP
level.
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