Finish this sentence: When the RBA decides to decrease the cash rate,

Question

BlackTom AI · Accepted Answer

Lowering the cash rate reduces the price of short-term borrowing, so households and firms face cheaper loans and lower returns on saving.

1. Relevant knowledge points and concepts
- Cash rate: the central bank’s policy interest rate that influences market interest rates.  
- Transmission mechanisms: interest rate channel (cheaper borrowing → more consumption and investment), exchange rate channel (lower rates can depreciate the currency → increase net exports), and wealth/asset-price effects (lower rates raise asset values → boost spending).  
- Aggregate demand (AD): AD = C + I + G + (X − M). Higher C, I or X shift AD right, raising real GDP and employment and putting upward pressure on the price level.

2. Step-by-step reasoning
- The RBA decreases the cash rate → commercial banks lower lending rates and mortgage rates.  
- Cheaper borrowing increases household consumption (durable goods, housing) and business investment.  
- If the AUD weakens, exports become more competitive and imports fall, further increasing AD.  
- The rightward AD shift raises real GDP (higher growth) and creates more demand for labour (higher employment, lower unemployment).  
- With higher aggregate demand relative to supply, the general price level rises (higher inflation).

3. Calculations
- No numerical calculation is required for this conceptual question. The qualitative sequence is sufficient.

4. Why the correct answer is correct
- Option b captures the textbook effect: decreasing the cash rate increases AD, producing higher economic growth, higher employment, and higher prices.

5. Why other options are incorrect
- a: Correct about AD increasing and lower unemployment, but incorrect in saying prices fall; lower rates typically raise prices, not lower them.  
- c: Incorrect because AD would not decrease when the cash rate is cut.  
- d: Contradicts the normal transmission: rising AD would not lead to lower growth and higher unemployment.

6. Conclusion
- Therefore the correct choice is b: Aggregate demand increases, leading to higher growth, employment and prices. This matches the provided answer.

Finish this sentence: When the RBA decides to decrease the cash rate,单项选择题

类似问题

Which of the following is not a strength of using monetary policy as a tool to achieve macroeconomic goals?

Finish this sentence: When the RBA decides to increase the cash rate,

A decrease in money supply will likely lead to

Which of the following is not a limitation of using monetary policy as a tool to achieve macroeconomic goals?

In recent years, by how much does the RBA usually adjust the cash rate when it makes an adjustment?

What does monetary policy involve?

What is the duty of the Reserve Bank of Australia (RBA)?

A decrease in money supply will likely lead to

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单