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Describe the Role of the Reserve Bank of Australia in Financial Markets and Explain How the Reserve Bank Changes Interest Rates to Affect the Business Cycle. Use Current Economic Data to Describe the Stance of Monetary Policy at Present in Australia Essay

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Describe the role of the reserve bank of Australia in financial markets and explain how the reserve bank changes interest rates to affect the business cycle. Use current economic data to describe the stance of monetary policy at present in Australia

A key part of financial markets in Australia is the money market – the market for borrowable funds. There is demand, supply and price just like other markets in Australia. The Business cycle refers to the fluctuations in the level of economic growth due to either domestic or international factors. The Reserve Bank of Australia (RBA) is an Australian government body which has the responsibility of maintaing and supervising the financial system. Specifically, the Reserve Bank looks after the regulation of payments systems (credit cards, loans), the stability of the financial system and Australia's monetary policy. Monetary policy involves setting the interest rate on overnight loans in the money market (‘the cash rate’). The cash rate influences other interest rates in the economy, affecting the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation.

The Reserve Bank is also defined as a central bank, meaning it deals with the country's money and banking system. The price of money in the money market is the rate of interest however the price in the money market is not achieved through equilibrium of market forces alone, with the RBA playing a key indirect role in setting interest rates. Money is central to so many parts of the economy such as buying goods and services, saving for retirement or investing in property and business, therefore the working of the money markets have effects on every other part of the economy. In determining monetary policy, the RBA has a duty to maintain price stability, full employment, and the economic prosperity and welfare of the Australian people.

Money plays a crucial role in the functioning of any modern economy. This is because the value of...

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MLA Citation

"Describe the Role of the Reserve Bank of Australia in Financial Markets and Explain How the Reserve Bank Changes Interest Rates to Affect the Business Cycle. Use Current Economic Data to Describe the Stance of Monetary Policy at Present in Australia". Anti Essays. 9 Dec. 2018

<http://snehaedu.com/free-essays/Describe-The-Role-Of-The-Reserve-356799.html>

APA Citation

Describe the Role of the Reserve Bank of Australia in Financial Markets and Explain How the Reserve Bank Changes Interest Rates to Affect the Business Cycle. Use Current Economic Data to Describe the Stance of Monetary Policy at Present in Australia. Anti Essays. Retrieved December 9, 2018, from the World Wide Web: http://snehaedu.com/free-essays/Describe-The-Role-Of-The-Reserve-356799.html