If the Reserve Bank increases the cash rate,other short-term interest rates ________ and the quantity of money and the supply of loanable funds ________.

Question

Quizplus · Accepted Answer

When the Reserve Bank increases the cash rate, other short-term interest rates typically rise as well, which leads to a decrease in the quantity of money and the supply of loanable funds. This happens because higher interest rates make borrowing more expensive for consumers and businesses, which reduces their demand for loans and reduces the supply of available funds. As a result, the cost of borrowing increases, which can help to slow down inflation and cool off an overheating economy.

If the Reserve Bank Increases the Cash Rate,other Short-Term Interest