Which of the following is not a strength of monetary policy
Its short implementation lag
Its short impact lag
The RBA's independence
Its ability to achieve all objectives simultaneously in the long run
Which of the following best explains why general interest rates might not theoretically increase by as much as any given increase in the target cash rate?
The exchange rate increases, forcing up interest rates
There is intense competition in the financial sector, resulting in a reduction in lending margins
A financial crisis occurs causing an increase in the cost of funds on global wholesale markets
Higher profitability of banks and a willingness to increase benefits to customers
In relation to monetary policy neutrality, which of the following is most correct?
It occurs when the cash rate is at exactly 5.5%
It is defined as that level of cash rate such that it is helping to provide mild stimulus to the economy
The exact level for the cash rate that is consistent with MP neutrality will change over time
It occurs when the RBA loosens MP during times of low rates of economic growth
In relation to monetary policy, which of the following statements is incorrect
There are generally five accepted transmission channels that illustrate how a change in interest rates is likely to affect economic activity
Monetary policy neutrality means that policy is neither exerting an expansionary or contractionary impact on the economy
An expansionary monetary policy stance can still exist even when monetary policy has been tightened
When the RBA tightens monetary policy, other interest rates are likely to fall by approximately the same extent as the reduction in the target cash rate
Which of the following is least correct in relation to a loosening of monetary policy
Lower income earners can benefit in the short to medium term
Inflationary pressures are likely to build over time
Upward pressure will be exerted on any current account deficit as a consequence of stronger growth in national spending
The unemployment rate is likely to rise over the short to medium term
A more restrictive or contractionary monetary policy stance is likely to
increase the demand for labour and reduce unemployment
reduce pressure on the value of the Australian dollar
reduce Investment expenditure by businesses
Result from the RBA reducing the policy interest rate corridor
The RBA's ultimate objective is to achieve
An increase in living standards
An increase in economic growth
A reduction in the rate of inflation
A reduction in the rate of unemployment
Which of the following indicators is unlikely to cause the RBA to consider loosening of monetary policy
Slower global growth rates
Strong growth in prices received for exports
Declining consumer and investor confidence
A lower level of job vacancies
Which of the following indicators is unlikely to cause the RBA to consider tightening monetary policy
Strong growth in China and India
A higher value for the Australian dollar
Higher global oil prices
Lower levels of unemployment
Which of the following is least correct in relation to a decision by the RBA to loosen monetary policy
The RBA will offer to purchase securities at a higher price from institutions in the cash market
The RBA will announce a decrease in the target cash rate and must then manipulate the market every day to ensure the actual cash rate is as close as possible to the new target
The RBA is concerned about the high value of the Australian dollar and wishes to reduce its value
The RBA is likely to be satisfied that inflation is under control and that it can then focus on growth and employment