The RBA's Responsibility for Financial System Stability Is Carried Out

question 39

Multiple Choice

The RBA's responsibility for financial system stability is carried out in a number of ways.These do NOT include:

• A)influencing the rate of economic activity and inflation through monetary policy
• B)ensuring the payments system is sound
• C)acting as lender of last resort to the banking system
• D)being prepared to bail-out institutions that are 'too-big-to-fail'
• E)regularly reviewing the stability of the domestic and global financial systems.

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Definitions:

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences, maximizing overall societal welfare.

Productive Efficiency

A situation where a firm or economy produces output at the lowest possible cost, using all its resources efficiently.

Pure Competition

A market structure characterized by a large number of small firms, a homogenous product, and very easy entry and exit from the market.

Spillovers

Effects of an economic activity that impact third parties who are not directly involved in the activity, potentially leading to externalities.