QUESTION 35

C1 - Critical thinking and critical writing

For each of the statement below, assess whether the statement is TRUE, FALSE or UNCLEAR. Provide an explanation /illustration of why this is the case. Without an explanation or with an explanation that is off topic, you will receive 0 mark.

(a) Through expectations theory, the current cash rate and the expected future cash rate can explain the interest rate on a two month loan that a bank makes to another bank .

(3 marks)

(b) The purchase of Treasury bonds by the RBA from a superannuation fund creates new bank deposits and leaves ESF unchanged.

(3 marks)

(c) The purchase of Treasury bonds by the RBA in the secondary market is expected to decrease the yield on corporate bonds.

(3 marks)

The expected length for each answer is approximately 3 or 4 sentences.