In recent years in response to lower real GDP growth, higher cyclical unemployment and lower inflation the
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Question:
In recent years in response to lower real GDP growth, higher cyclical unemployment and lower inflation the Reserve Bank of Australia lowered the cash rate from 2.75% to 0.10% in 2020.
Required:
- Explain the intended impact of the RBA’s policy to lower the cash rate on:
- consumption spending;
- investment spending;
- aggregate demand.
- What is the impact of the RBA’s policy on the value of the Australian dollar (AUD) in the forex market? Explainyour answer.
- In 2019 Peter Lim deposited $60,000 into a bank account at a fixed interest rate of 5% annually. As a result of RBA policy the inflation rate increases from 1% to 3%. Is Peter ‘better’ or ‘worse’ off as a result? Briefly explain with reference to the real interest rate.
Related Book For
International Economics
ISBN: 978-1429278447
3rd edition
Authors: Robert C. Feenstra, Alan M. Taylor
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