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?

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

- consumption spending;

- investment spending;

- aggregate demand.

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