Suppose the Reserve Bank lowers the cash rate.Put the following changes in the order in which they occur,starting with the changes that take place almost immediately and ending with the changes that may occur up to a year afterwards: i.Quantity of money increases.
Ii)Short-term interest rates fall.
Iii)Aggregate demand increases.
Iv)The long-term real interest rate falls.

Question

Quizplus · Accepted Answer

When the Reserve Bank lowers the cash rate, short-term interest rates fall almost immediately. This is followed by an increase in the quantity of money as borrowing becomes cheaper. Over time, the long-term real interest rate falls, leading to an increase in aggregate demand.

Suppose the Reserve Bank Lowers the Cash Rate