Let us consider the following two monetary policy options for the Reserve Bank of Australia (RBA):...

 

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Let us consider the following two monetary policy options for the Reserve Bank of Australia (RBA): holding the money supply constant holding the interest rate constant. Assume that the main goal of the RBA is to stabilise output. Using the IS-LM model, carefully explain which policy option will allow the RBA to better achieve this goal under the following conditions. Each time, use appropriate diagrams to support answer. a) Investors are more optimistic about the future. b) (3 marks) highly contagious disease (e.g., Covid-19) causes consumers to use credit card more frequently in transactions. (3 marks) Let us consider the following two monetary policy options for the Reserve Bank of Australia (RBA): holding the money supply constant holding the interest rate constant. Assume that the main goal of the RBA is to stabilise output. Using the IS-LM model, carefully explain which policy option will allow the RBA to better achieve this goal under the following conditions. Each time, use appropriate diagrams to support answer. a) Investors are more optimistic about the future. b) (3 marks) highly contagious disease (e.g., Covid-19) causes consumers to use credit card more frequently in transactions. (3 marks)

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a Investors are more optimistic about the future In the ISLM model an increase in optimism among inv... View the full answer