T2 Assignment

Posted: December 10th, 2013

The RBA has lowered the official cash rate over the last year.

(use many diagram or chart to help explain the answer)

Q1.
Explain the difference between the official cash rate and the market rate of interest. Explain the mechanism by which the RBA decreases the cash rate. Use diagram(s) in answering the question.

Q2.
Analyse the effects of a decrease in the interest rate on consumption and investment expenditures, the level of aggregate demand, the inflation and the unemployment rates.

Q3.
Explain what is the meant by the credit creation process of the commercial banks and how it may be influenced by the expansionary monetary policy.

Presentation and referencing (with harvard citation and referencing)