RBA

Question 1

RBA goal is…

Answer 1

To keep inflation between 2-3% by using monetary policy

Question 2

Monetary policy

Answer 2

the process by which the central bank manages the supply of money and interest rates to influence the economy.

Question 3

A way to implement the monetary policy is…

Answer 3

Cash rate

Question 4

Cash rate

Answer 4

the interest rate that banks pay to borrow money from the RBA overnight

Question 5

What happens when cash rate is increased

Answer 5

it makes borrowing more expensive for banks, who then pass these expenses onto their customers

Question 6

Monetary policy PROS

Answer 6

can help maintain the stability of prices.
can help maintain the value of money, which is important for peoples savings and investments
can help avoid negative consequences of high inflation

Question 7

Monetary policy CONS

Answer 7

can reduce economic growth and employment, then results in businesses and consumers spending less money
can make it difficult for people to borrow money
can lead to increased financial stress for people who have previously borrowed money at a variable rate.