What are the equilibrium implications in terms

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Question:

A. On May 3, 2023, the Australian central bank, RBA changed the target cash rate (TCR) by 25 basis points, from 3.6% to 3.85%. Explain the specific operational steps that the RBA must have taken to implement this change. (Hint: explain the change in the RBA lending rate, the RBA borrowing rate, and any open market operations that may be needed to support a change of this nature.

- Support your answer with a clearly labelled diagram

B. In November 2020, RBA announced that it would introduce a $100 Billion QE (Quantitative Easing) program in Australia. Assuming that money-multiplier in Australia is 2.5, what are the equilibrium implications in terms of new loans and new checkable deposits on the Australian banking sector? Explain with the help of relevant t-account entries on the balance sheets of RBA and the aggregate banking system.

Reference no: EM133491870

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