-Refer to the figure above. If the Reserve Bank raises the cash rate, in the days following, other short-term interest rates ________ and the exchange rate ________.

Question

Quizplus · Accepted Answer

When the Reserve Bank raises the cash rate, it generally leads to an increase in other short-term interest rates as lenders adjust their rates to maintain competitiveness and profitability. Additionally, a higher cash rate can attract foreign investment, leading to an appreciation of the domestic currency, hence the exchange rate rises.

-Refer to the Figure Above