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Assume that the cash rate in the market for exchange settlement account funds is initially equal to its target value. However the central bank expects
Assume that the cash rate in the market for exchange settlement account funds is initially equal to its target value. However the central bank expects that later in the day that there will be a large outflow of funds from the private banks to the government for the payment of individuals income taxes. What will the central bank have to do to get the cash rate back to its target. a. The RBA should purchase bonds from the commercial banks. b. The RBA should reduce the funds in banks exchange settlement accounts. c. The RBA should sell bonds to the commercial banks. d. The RBA does not have to do anything. The market will self correct. e. None of the other answers are correct
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