2025HSCShort answer

Q24 (b)

3 marks

Question

Explain how the Reserve Bank of Australia (RBA) maintains the cash rate target.

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Solution

Criteria	Marks
Explains how the RBA maintains the cash rate target	3
Demonstrates some understanding of how the RBA maintains the cash rate target	2
Provides some relevant information	1

Sample answer:

The policy interest rate corridor establishes a price ceiling for lending rates and a price floor for deposit rates. This encourages inter-bank transactions where banks can borrow at lower rates than those charged by the RBA and lend at higher rates than those paid by the RBA. Consequently, the cash rates within the market gravitate towards the desired cash rate target.

Answers could include:

Cash rate target/policy interest rate corridor
Exchange Settlement Account balances
Deposit and lending rates
Domestic market operations/open market operations
Ample Reserves system (2025).

Supplied marking guidance · human reviewed

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Syllabus alignment

Economic Policies and Management

Macroeconomic and microeconomic policiesEvaluate fiscal, monetary, microeconomic and labour market policies in Australia.

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