If the Reserve Bank is concerned about a possible recession, it ________ the target cash rate and ________ securities in open market operations. The supply of money ________ and the short-term interest rate ________.

Question

Quizplus · Accepted Answer

To combat a possible recession, the Reserve Bank would lower the target cash rate and buy securities in open market operations, which increases the supply of money and causes the short-term interest rate to fall. This is aimed at stimulating economic activity by making borrowing cheaper.

If the Reserve Bank Is Concerned About a Possible Recession