Monetary Policy

Question 1

Why is it beneficial to have
high living standards?

Answer 1

Improving living standards is a key economic goal of many countries. This is
mainly because a higher living standard leads to a stronger and more
prosperous nation.

Question 2

What is macroeconomic
policy?

Answer 2

Macroeconomic policies are policies that affect the whole nation.

Question 3

What is an example of
macroeconomic policy?

Answer 3

Fiscal policy sets out how much tax is collected and
how much the government should spend. Monetary policy sets the cash rate for Australia which
in turn affects interest rates for consumers and
businesses.

Question 4

What is the main factor to
drive economic growth?

Answer 4

Investment, government spending, exports and consumption are all
factors that drive economic growth (GDP). Consumption from consumers is the largest driver of economic growth.

Question 5

What is Monetary Policy?

Answer 5

Monetary policy refers to manipulation of the
cash rate by the Reserve bank to influence the
economy.

Question 6

How is the monetary policy implemented?

Answer 6

The Reserve Bank monitors domestic and international economic conditions. It
needs to be aware of the changes in a number of leading economic indicators
to assess the strength or weakness of the economy.

Question 7

When would the Reserve Bank of Australia adopt a contractionary stance?

Answer 7

The Reserve Bank will increase the cash rate in order to raise interest rates in the economy in order to decrease consumption thus decreasing economic growth

Question 8

Who is monetary policy set by?

Answer 8

Set by the central bank

Question 9

Who is fiscal policy set by?

Answer 9

Set by the government

Question 10

How does monetary policy influence
the economy?

Answer 10

Targets inflation, output and employment

Question 11

How does fiscal policy influence the
economy?

Answer 11

Involves the changes in taxes and government spending.