When the Reserve Bank raises the cash rate,almost immediately ________,and a few weeks later the ________.

Question

Quizplus · Accepted Answer

When the Reserve Bank raises the cash rate, it increases the cost of borrowing for commercial banks, which leads to an increase in short-term interest rates. As a result, the quantity of money and supply of loanable funds in the economy decrease. This is because higher interest rates discourage borrowing and encourage saving, thus reducing the amount of money available for lending. It takes a few weeks for these effects to fully filter through the economy. Therefore, the best choice is B.

When the Reserve Bank Raises the Cash Rate,almost Immediately ________,And