Question 3:

True or false? If false, explain why. (5 marks)

i. The Reserve Bank of Australia engages in open market operations only when it wants to change interest rates.

ii. Increases in the price level increase the quantity of money needed for buying and selling.

iii. A rise in the rate of real interest rate will lead to a movement downward along the money demand curve.

iv. The main goal of monetary policy in Australia is full employment of the labour force.

v. If the Reserve Bank of Australia buys financial instruments in the open market, net exports are likely to decrease.