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:

Normal Goods

Goods for which demand increases when income increases, and falls when income decreases, but price remains constant.

Inferior Goods

Products whose demand decreases as the income of consumers increases, reflecting a preference shift to higher-quality substitutes when affordability allows.

Price Elasticity

An assessment of the responsiveness of the demand for a product to variations in its price.

Supply

The total amount of a specific good or service that is available to consumers at a given price level and time.