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Suppose that inflation moves above the Reserve Bank of Australia's (RBA) target rate. Required (a) What monetary policy would you advise the RBA to implement?

Suppose that inflation moves above the Reserve Bank of Australia's (RBA) target rate.

Required

(a) What monetary policy would you advise the RBA to implement? Explain how this policy would affect output and inflation (i.e. explain the transmission channel of monetary policy).

(b) Explain how the RBA conducts open market operations to implement its policy.

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