Question
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
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started