ECON10003 Chapter Notes - Chapter 7-8: Output Gap, Risk Premium, Bond Market
31 Jul 2018
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Monetary policy, inflation and financial markets: money, prices and the reserve bank. 7. 2 bond market, stock market and the allocation of savings: diversification: the practice of spreading one(cid:495)s wealth over a variety of different financial investments to reduce overall risk. Bank deposits=desired reserve deposit ratio: bank reserves, bank reserves are currency initially deposited, the smaller the reserve to deposit ratio the more money that may be created. 7. 6 the reserve bank of australia: responsibilities, monetary policy influences the level of interest, oversight and regulation of financial markets, plays a major role during periods of crisis. Reserve bank: by carefully monitoring conditions in the cash market the. Increase the rate that reserve bank paid to other banks. 8. 2 can the reserve bank control real interest rates: through its targeting of the overnight cash interest rate the reserve bank can control nominal interest rates, not the real interest rate, r = i .
