Macroeconomics - L17 Monetary Policy

Question 1

What is Monetary Policy?

Answer 1

Policy operated by the Reserve Bank of Australia (RBA) which involves manipulation of interest rates to achieve the government’s economic and social goals.

Question 2

True or False
The RBA is the government’s bank / the central bank.

Answer 2

True

Question 3

True or False
The RBA is a government institution that operates independently from the Commonwealth/Federal government.

Answer 3

True

Question 4

The objectives of monetary policy are formally established in the Reserve Bank Act 1959. What are the 3 objectives?

Answer 4

1. Stability of the currency of Australia (2-3% inflation)
2. Maintenance of full employment (4-4.5% u/e).
3. Economic prosperity and welfare of the people of Australia.