When the Reserve Bank is assessing whether to increase interest rates, it does so in the belief that:

Question

Quizplus · Accepted Answer

When the Reserve Bank is assessing whether to increase interest rates, it usually does so in the belief that expected aggregate demand will place more pressure on prices. By increasing interest rates, the Reserve Bank aims to slow down economic growth to reduce inflationary pressures by making borrowing more expensive, which ultimately reduces aggregate demand.

When the Reserve Bank Is Assessing Whether to Increase Interest