Cash Rate
The RBA's main tool for putting monetary policy into action.
What is Cash Rate?
The price of one country's currency when traded for another country's currency.
What is Exchange Rate?
Microeconomic policy attempts to improve efficiency and shift this curve on the AD/AS model.
What is aggregate supply (AS)?
This term describes the ratio of a country's export prices to its import prices.
What is Terms of Trade?
When the Australian dollar depreciates, this group of businesses benefits because their goods become cheaper for overseas buyers.
What is Exporters?
The term for when the RBA cuts the rash rate to help stimulate a slowing economy.
What is Expansionary Monetary Policy?
This is what usually happens to the Australian dollar when the RBA decreases the cash rate.
What is depreciation?
This category of supply-side policy involves the government directly stepping in and funding things like infrastructure, education or training.
What is interventionist policy?
This trade theory, proposed by Adam Smith in 1776, argues countries should specialise in producing goods they can make at a lower cost than anyone else.
What is Absolute Advantage?
This happens to the price of Australian exports, in foreign currency, when the dollar depreciates.
What is cheaper?
This is what economist call it when the RBA raises the cash rate to slow down inflation.
What is Contractionary Monetary Policy?
This is the term for when the Australian dollar rises in value against other currencies.
What is Appreciation?
This category of supply-side policy involves pulling government back and relying more on market forces.
What is market-based policy?
This trade theory, developed by David Ricardo in 1817, argues nations should focus on producing goods where they have the lowest relative opportunity cost — even if one country is better at making everything.
What is Comparative Advantage?
When the Australian dollar appreciates, this group benefits because overseas goods become cheaper to buy.
What is Importers?
This is the range for which the RBA aims to keep annual inflation within.
What is 2-3%
Australia has used this type of exchange rate system since 1983, where supply and demand set the price.
What is Floating Exchange Rate?
This market-based policy involves removing government rules and red tape to increase competition in a market.
What is deregulation?
This is the terms of trade "break-even point" % where export prices exactly equal import prices.
What is 100%?
This happens to the price of imported goods for Australian consumers when the dollar depreciates.
What is dearer/more expensive?
Besides controlling inflation (Price Stability), this is the other main goal the RBA has in mind when setting the cash rate.
What is Full Employment?
This type of exchange rate is maintained by a countries central bank or government and does not respond to changes in supply or demand of the currency.
What is Fixed Exchange Rate?
This market-based policy involves selling off government-owned assets or businesses to the private sector.
What is privatisation?
This 1990 firm-based trade theory explains national success through factors including innovation, local demand conditions, factor conditions, and related/supporting industries.
What is Competitive Advantage?
This is the term economists use for measuring Exports minus (-) Imports.
What is Net Exports?