When the RBA Uses Contractionary Policy

question 46

Multiple Choice

When the RBA uses contractionary policy:

• A)the price level rises by more than it would if the RBA did not pursue policy.
• B)the price level rises by less than it would if the RBA did not pursue policy.
• C)it does not change the price level.
• D)it causes inflation.

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Definitions:

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a bond or stock certificate.

Semi-Annually

Semi-annually refers to an event or action occurring twice a year, typically every six months.

Real Rate Of Return

The yearly return percentage on an investment, modified for price level changes caused by inflation or other external factors.

Nominal Rate

The nominal rate is the interest rate set by the lending institution, not adjusted for inflation, representing the face value of the interest rate.