If the economy is inflationary, the RBA would most likely:
A) encourage banks to provide loans by buying government securities.
B) encourage banks to provide loans by raising the cash rate.
C) encourage banks to provide loans by selling government securities.
D) restrict bank lending by selling government securities.

Question

Quizplus · Accepted Answer

In an inflationary economy, the Reserve Bank of Australia (RBA) would aim to restrict bank lending to reduce the money supply and curb inflation. Selling government securities is a method to achieve this, as it takes money out of circulation when banks purchase these securities, thus reducing the amount of money available for lending.

If the Economy Is Inflationary, the RBA Would Most Likely