The Reserve Bank of Australia and Interest Rates

The Reserve Bank of Australia and Interest Rates.
How is an increase in the cash rate likely to affect mortgage interest rates? Increases will be announced almost immediately in variable rates. How is an increase in the cash rate likely to affect imports An increase in the cash rate may attract an additional flow in of foreign investment funds which will increase the AUD exchange rate. Foreign goods priced in a currency against which the AUD has appreciated will be cheaper in AUD terms and thus the quantity of the goods sold may will increase.
How is an increase in the cash rate likely to affect the exchange rate? An increase in the cash rate may attract an additional inflow of foreign investment funds which will increase the AUD exchange rate (appreciate the currency). 20. Will a drop in the cash rate affect inflation? Explain. Theoretically it will. A drop in the cash rate will stimulate borrowing, investment and economic activity. The increased demand for resources will put upward pressure on the prices of resources and may lead to inflation. Answers to in-chapter questions 3. What is likely to happen to the monetary base when (a) Centrelink credits age pension to pensioners’ bank accounts? – increase in money supply, (b) the RBA buys government securities from Australian investors and (c) banks raise funds by an overseas note issue?
A – increase in money supply B – increase in money supply C – no change as if the payments are received in forex, then they exchange the currency for AUD already in the money supply. If the payments are received in AUD, then other agents have already exchanged the forex for AUD. 3. Why do the financial markets pay so much attention to the cash rate? The cash rate reflects the monetary policy stance and the influence the RBA is trying to exert on the level of economic activity. It also has a significant impact on consumer and business confidence, willingness to invest and spend and ability to service their debt. 3. 4 Describe the likely consequences for GDP growth when the RBA sells CGS to raise funds for the Commonwealth Government A sale of CGS will reduce the supply of money in the economy all other things being equal.

This will lead to increased in interest rates as money supply reduces. Higher interest rates reduce the spending power of consumers and business. This results in less spending, investment and a general decline in asset values as spending tightens. Consumers and business are also likely to become more conservative as rates increase. This would then limit GDP growth. It also must be consider for what purpose the funds will be used and this may mitigate the restrictive monetary policy position.

The Reserve Bank of Australia and Interest Rates

superadmin (28431)
New York University

Hire an Expert to Help you

Hire Verified Expert

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
Have a homework question? Get help from verified tutors now!

Are You Looking For Assignment Help? We Can Certainly Assist You