When the RBA sells government securities:
A) the reserve deposits of banks rise.
B) the reserve deposits of banks fall.
C) the reserve deposits of banks remain unaffected.
D) the cash rate must fall.

Question

Quizplus · Accepted Answer

When the RBA sells government securities, it reduces the amount of money in the banking system, which reduces the reserves available to banks. As a result, the reserve deposits of banks fall. This is done by the RBA to tighten monetary policy and reduce inflation.

When the RBA Sells Government Securities