monetary policy
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Monetary policy can be defined as those actions by the Reserve Bank of Australia that are designed to affect the availability of money in the Australian economy. The RBA achieves this by altering the supply of money, which in turn will affect the cost at a retail level. This will have implications for both aggregate supply and aggregate demand, and through this the RBA is able to try and achieve economic goals as set out in their charter.
The supply of money is measured in a variety of ways. Two commonly used measures of the money supply are M3 and Broad Money.
1. M3: This is calculated to be the total volume of coins and notes in the hands of the general public, plus any deposits in the bank, plus any deposits that the bank has with the RBA.
2. Broad Money: As the name implies, this measure of money is slightly more inclusive than the measure of M3. Broad money is M3 plus any deposits that are held with Non-Bank Financial Institutions (NBFIs)...