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The Reserve Bank of Australia Lowers the Cash Rate

Question 14

Multiple Choice

The Reserve Bank of Australia lowers the cash rate. A mechanism through which aggregate demand increases is that the lower cash rate


A) raises the exchange rate so that net exports decrease, which increases investment, thereby increasing aggregate demand.
B) decreases other short- term interest rates, which increases investment, thereby increasing aggregate demand.
C) increases other short- term interest rates, which decreases investment, thereby decreasing aggregate demand.
D) decreases other short- term interest rates, which decreases investment, thereby increasing aggregate demand.

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