Question 2:

What role does the Reserve Bank of Australia (RBA) have in the economy? (2 marks)

Question 3: State whether each of the following statements is true or false? If false explain why (5 marks)

i. When employees receive their wages after they have completed two weeks' work, this is an example of money serving as a standard of deferred payment.

ii. As credit is now the main measure of monetary movements used by the Reserve Bank of Australia, credit is now defined as money.

iii. If households in the economy decide to take money out of demand-deposit accounts and put this money into long-term savings accounts, this will decrease M1 and increase M3.

iv. If banks increase their reserve ratios, the deposit multiplier increases.

v. If the Reserve Bank of Australia sells financial securities, this increases reserves and encourages banks to make more loans.