If the Reserve Bank of Australia fears inflation it will undertake an open market of securities, the cash rate will and the long- term real interest rate will .

Question

Quizplus · Accepted Answer

When the Reserve Bank of Australia fears inflation, it will sell securities in the open market to reduce the money supply. This action causes the cash rate to rise, and typically, the long-term real interest rate will also rise as a result of tighter monetary policy.

If the Reserve Bank of Australia Fears Inflation It Will