Re: Economics Marathon - The 2006 Version
ooooh finally a question i can half answer! every time i come on, there seems to be a super hard question....
lets see....RBA can intervene in the Australian Economy through the monetary policy, where they can implement either an expansionary or contractionary policy through the lowering/incresing of interest rates, through the buying/selling of Commonwealth Government Securities (CGS). if the RBA sells CGS to financial institutions, it decreases the money supply, thus increasing the cash rate. Alternatively, it can buy CGS from financial institutions, increasing the money supply and lowering the cash rate.
Theres a bit about exchange rate too.....let me think *rustles through textbook*...
Higher interest rates relative to overseas will increase the capital inflow, increasing the demand for AUD thus appreciating the AUD as demand exceeds supply. this will lower the cost of imports, but increase the cost of exports, thus having a contractionary effect on the economy. on the other hand, a lower interest rate relative to overseas will lead to a capital outflow, depreciating the AUD, and increasing costs of imports, but decreasing cost of exports.
thats the best i could think of, but knowing me, my economics isnt very good so can someone check over it? i feel like i left some stuff out....
anyways, my question: what is the national competition policy?