Give an Example of a Monetary Policy Target

question 35

Essay

Give an example of a monetary policy target. Explain which monetary policy target the Reserve Bank of Australia (RBA)uses and why the RBA uses a policy target.
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Definitions:

LAC Curves

Long Average Cost curves, which show the minimum average cost of production at different levels of output, assuming all production factors are variable.

Output Levels

The quantities of goods or services produced by a firm or industry at a given time or under certain conditions.

Economies of Scale

The economic gains achieved by businesses because of their large scale, volume of production, or extent of operations, which usually results in a reduction in the cost per unit as the scale of operation grows.

Cost-output Elasticity

Cost-output elasticity measures the responsiveness of the cost of producing a good to a change in the output level, indicating how costs change as production scales.