If the Reserve Bank raises the target cash rate, which of the following happens?

Question

Quizplus · Accepted Answer

When the Reserve Bank raises the target cash rate, it becomes more expensive to borrow money. This typically leads to a decrease in spending and investment, which in turn reduces aggregate demand. Higher interest rates do not directly increase net exports, raise real GDP, lower real interest rates, or raise the price level in the short term. Instead, the immediate effect is a contraction in aggregate demand due to the higher cost of borrowing.

If the Reserve Bank Raises the Target Cash Rate, Which