When the Reserve Bank is worried about inflation,it ________ the target cash rate and,in the short term,________ the real interest rate.

Question

Quizplus · Accepted Answer

When the Reserve Bank is worried about inflation, it raises the target cash rate, which in turn raises the real interest rate in the short term. By increasing the cost of borrowing, the Reserve Bank tries to reduce consumer and business spending, which helps to control inflation. Therefore, option C is the correct answer.

When the Reserve Bank Is Worried About Inflation,it ________ the Target