If the Reserve Bank of Australia wants to increase interest rates, it will:
A)buy financial securities.
B)sell financial securities.
C)increase the exchange rate.
D)decrease the exchange rate.

Question

Quizplus · Accepted Answer

When the Reserve Bank of Australia wants to increase interest rates, it will sell financial securities. Selling securities means that the central bank withdraws money from the economy, which reduces the supply of money. With a reduced supply of money, the demand for money increases, leading to an increase in interest rates. This is a way of fighting inflation and controlling the economy. Selling financial securities helps in regulating the supply of money and credit in the economy.

If the Reserve Bank of Australia Wants to Increase Interest