Question

1. Which of the following will not occur in response to a decrease in the cash rate target set by the RBA (all else constant).

Group of answer choices

A, The Australian dollar will depreciate.

B,Investment spending will increase.

C, Government spending will increase.

D, Interest rates across the economy will tend to decrease.

2. In a fractional reserve banking system, assuming away various complexities such as taxes, imports, and cash savings, the simple deposit multiplier can be used to calculate the ratio of the amount of new deposits created by banks to the amount of new reserves.

For example, if the reserve ratio was 10%, the simple deposit multiplier would be 10.

If we were to have a 10% reserve ratio, but also incorporate the possibility that some proportion of spending is spent on imports, then the multiplier would

Group of answer choices

A, be greater than 10.

B, still be 10.

C, be less than 10.

3. Short-run resource crowding out is likely to be less of a problem when the economy is _________.

Group of answer choices

A, at potential GDP

B, below potential GDP

C, above potential GDP

4. Which of the below is an example of expansionary fiscal policy

Group of answer choices

A,an increase in unemployment benefits paid due to more people being unemployed.

B, An decrease in Government spending on roads.

C, A decrease in income tax rates.

D, A decrease in tax revenue due to lower profits of businesses.

5. What is the most likely reason that estimates of the structural budget balance in previous years are likely to differ between different economic analysts?

Group of answer choices

A, Government spending data is inaccurate.

B, Potential GDP is unknown and must also be estimated.

C, It is hard to know if there is a budget deficit in a given year.

D, Government net debt is not publicly reported data.

Answer 1

1)The cash rate is actually the interest rate charged on overnight loans between banks. When there is a decrease in the cash rate target set by the RBA, it leads to fall in interest rate and this will lead to an increase in investment spending in the economy. With fall in cash rate, there is an outflow of capital and as a result Australian dollar will depreciate. Increase in government spending is part of the fiscal policy and is not a response to monetary policy. Hence the answer is option (C).