23.

There are three parts to Question 23. All questions here must be answered. Please clearly outline which question you are answering by labelling it as Q23a, Q23b or Q23c.

In all questions below, assume that interest rates overseas have not changed.

Q23a) Describe the consequences of a decrease in the cash rate on: the current account of the balance of payments.

Make sure to include a definition of "current account" in your answer AND to identify the likely consequences of the decrease in the cash rate on the two key components that make up the current account (5 marks)

Q23b) Describe the consequences of a decrease in the cash rate on: consumption (5 marks)

Q23c) Describe the consequences of a decrease in the cash rate on: investment in the housing market (5 marks)