Question:Concerned for the current state of the Australian economy the
Reserve Bank of Australia (RBA) has...
Question
Concerned for the current state of the Australian economy the
Reserve Bank of Australia (RBA) has...
Concerned for the current state of the Australian economy the
Reserve Bank of Australia (RBA) has decided to reduce interest
rates. Describe the mechanism that the RBA will undertake to
achieve this outcome.
Explain how this reduced interest rate will transmit through
the economy.
What do you think would be the impact on the economy of this
policy if the velocity component of the quantity theory of money
equation M*V=P*Q was much slower than anticipated?
What would be the likely affect if the RBA misjudged the state
of the economy and it was closer to full employment than
anticipated? A diagram would assist your answer here and attract
more marks.