In recent years in response to lower real GDP growth, higher cyclical unemployment and lower inflation the Reserve Bank of Australia lowered the cash rate from 2.75% to 0.25% in 2019.

Required:

(i)What role does the cash rate make in the Reserve Bank's monetary policy?What is the aim / objective of the of the RBA in lowering the cash rate?

(i)Explain the impact of the RBA's policy to lower the cash rate on:

- consumption spending;

- investment spending;

- aggregate demand.

(i)What is the impact of the RBA's policy on the value of the Australian dollar (AUD) in the forex market?Explain your answer.

(i)In 2019 Peter Lim deposited $60,000 into a bank account at a fixed interest rate of 5%.As a result of the RBA policy the inflation rate increases from 1% to 3%.Is Peter 'better' or 'worse' off as a result?Briefly explain with reference to the real interest rate.