When the RBA is trying to control rising inflation, it:
A)decreases the interest rate that financial institutions can earn on overnight loans of their currency
B)targets inflation at two to three percent
C)increases the interest rate that financial institutions can earn on overnight loans of their currency
D)all of the above

Question

Quizplus · Accepted Answer

When the RBA wants to control rising inflation, it increases the interest rate that financial institutions can earn on overnight loans of their currency. This makes borrowing more expensive and reduces spending, thereby reducing inflation. The RBA targets inflation at two to three percent, but decreasing the interest rate would only exacerbate inflation. Therefore, the best choice is C.

When the RBA Is Trying to Control Rising Inflation, It