Monetary Policy

Question 1

What is consumption and what is the largest driver of economic? growth?

Answer 1

Largest driver of economic growth is consumption

Main determinant of consumption is the level of disposable income

Question 2

Monetary Policy

Answer 2

Monetary policy is the manipulation of the cash rate done by the RBA to stabilise the economy.

Question 3

Monetary Transmission mechanism

Answer 3

Changes in cash rate, lead to changes in interest rate, this leads to changes in consumer consumption affecting the GPD, Unemployment Rate and Inflation rate.

Question 4

How many members of the board meet every month

Answer 4

Nine Members

Question 5

RBA responsibilities

Answer 5

RBA monitors domestic and international indicators.

RBA has to assess the state of the economy in the business cycle.

Question 6

What is monetary contractionary stance?

Answer 6

Contractionary stance, when the inflation rate is high and is used to slow down the economy. By increasing the cash rate.

Question 7

What is an expansionary stance?

Answer 7

Expansionary stance, when the inflation rate is low and the consumer spending in low it is used to stimulate the economy.