Monetary Policy

Expansionary monetary policy is most likely to be maintained if the

• Australian Government is still running a budget deficit.

• value of the Australian dollar is below its long-term average.

• rate of inflation is below the Reserve Bank of Australia’s (RBA) target.

• unemployment rate is below what is required to achieve full employment.

Which one of the following is not a role of the RBA?

• adjusting tax rates

• issuing Australia’s bank notes

• managing foreign currency reserves

• providing specialist banking services to the Australian Government

A reduction in the cash rate is likely to result in

• an increase in the value of the Australian dollar and a lower inflation rate.

• a decrease in the value of the Australian dollar and a higher inflation rate.

• a decrease in the value of the Australian dollar and a higher unemployment rate.

• an increase in the value of the Australian dollar and a lower unemployment rate.

Which one of the following is least likely to be an example of a monetary policy transmission mechanism resulting from lower interest rates?

• an increase in net capital inflow

• an increase in borrowings for housing investment

• a decrease in imports resulting from a fall in the value of the Australian dollar

• an increase in exports resulting from a fall in the value of the Australian dollar

A contractionary stance in monetary policy by the Reserve Bank of Australia (RBA) could be achieved by

• selling Commonwealth Government Securities to increase cash in the overnight money market.

• buying Commonwealth Government Securities to increase cash in the overnight money market.

• selling Commonwealth Government Securities to decrease cash in the overnight money market.

• buying Commonwealth Government Securities to decrease cash in the overnight money market

Expansionary monetary policy is most likely to cause

• a decrease in welfare payments.

• an appreciation of the Australian dollar.

• a reduction in the rate of economic growth.

• an increase in the size of the budget deficit.

When the economy is experiencing low rates of inflation and low rates of economic and employment growth, the Reserve Bank of Australia will be likely to

• sell government securities in order to increase the cash rate.

• sell government securities in order to decrease the cash rate.

• purchase government securities in order to increase the cash rate.

• purchase government securities in order to decrease the cash rate.

When the Reserve Bank of Australia buys government securities on the overnight market, the effect will be to

 

• increase the supply of cash in the money market and increase the cash rate.

• decrease the supply of cash in the money market and increase the cash rate.

• increase the supply of cash in the money market and decrease the cash rate.

• decrease the supply of cash in the money market and decrease the cash rate.