Answers for Tutorial Homework due Week 4

Answers for Tutorial Homework due Week 4 - Answers for...

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Answers for Tutorial Questions due Week 4 3.1 What would happen to the money base if the Commonwealth government collected $1 billion in taxes and the RBA bought 0.5 billion in the CGS in a single day? How would the cash rate become involved in these transactions? $1 billion paid out of money supply (MS) and $0.5 billion paid into MS, making a $0.5 billion net reduction. The reduction in funds theoretically reduces loanable funds and therefore puts upward pressure on the cash rate. The cash rate is involved through the clearing mechanism between banks and the ESA accounts held with the RBA. 3.2 If the RBA bought $3.5 billion in CSG and the public withdrew $2.0 billion from their transaction deposits in the form of cash, by how much would the money base change? By how much would financial institutions’ reserves change? The RBA’s purchase put $3.5 billion into MS. The public’s withdrawals do not change MS. The FIs’ aggregated reserves were affected only by the change in MS - $3.5 billion.
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This note was uploaded on 06/09/2009 for the course ACCOUNTING 1203AFE taught by Professor Ms.mirellamalin during the Three '08 term at Griffith.

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Answers for Tutorial Homework due Week 4 - Answers for...

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