We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Macroeconomic - Market Rate of Interest - Essay Example

Comments (0)
Summary
Macroeconomic 1. Explain the difference between the official cash rate and the market rate of interest. Explain the mechanism by which the RBA decreases the cash rate. Use diagram(s) in answering the question. Answer: It is the responsibility of the Reserve Bank to set the official cash rate which is regarded as the interest rate directed to meet the inflation target prescribed in the policy agreements…
Download full paper
GRAB THE BEST PAPER
Macroeconomic - Market Rate of Interest
Read TextPreview

Extract of sample
Macroeconomic - Market Rate of Interest

Download file to see previous pages... The cash rate can be changed by the mortgage as well as the rates of business loans. The aggregate economy is often influenced by monetary policy. Suppose the Reserve Bank deals in supplying more money to the commercial banks, those banks will attempt to keep the reserve rate at steady level and launch into lending more cash in the market. This will lead to a fall in the cash rate. The supply of funds can be increased by increasing the average maturity of the repos, expanding the private security ranges. The changes in the monetary policy will shed its effects on the interest rates in the short run and thus the relationship between the cash arte and the interest rates can be easily defined. But it should be kept in mind that the cash rate lacks the potential to determine the level of intermediary’s rates (Campbell, 1997). 2. Analyze the effects of a decrease in the interest rate on consumption and investment expenditures, the level of aggregate demand, the inflation and the unemployment rates. Answer: The changes in the interest rates can shed effects on the consumption spending. With increase in the price levels the interest rates tends to increase. ...
On the other hand the expenditures on consumption will decrease. Aggregate demand is expressed by AD = C + I + G + (X-M), where C= consumption, I= capital investment, G= government spending, and (X-M) = trade balance. When the interest rate falls, the capital investment rises and therefore the aggregate demand rises. The effect is just the opposite for rise in the level of interest rates. If the interest rates fall, the demand prevailing in the society for the goods as well as services will fall. Therefore the prices of the products will tend to fall being the resultant of fall in price. Decrease in demand will lead to less production and eventually unemployment rises. 3. Explain what is the meant by the credit creation process of the commercial banks and how it may be influenced by the expansionary monetary policy. Answer: The primary functions of banks include acceptance of deposits, remittance of funds, advancing loans, creation of credit and financing foreign trade. Creation of credit is one of the unique functions of the bank. It is the responsibility of the banks to supply money to the traders as well as to the manufacturers. The banks are also involved in creating or manufacturing money. The deposits of the banks can be regarded as money. Such deposits can be compared with cash. The deposits can be used in purchasing goods as well as services. They can also be used in debt payments. The deposits of the customers are called primary deposits. The banks keep a certain part of the deposits in the form of reserves while the rest is made available for loans advancements. Therefore every deposit has the potential to create loan. The banks do not pay cash to the customer when it grants a loan to them. The bank simply credits the requisite or the loan amount in the ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
The effects of interest rate volatilities on the demand of Turkish money
This project studied, particularly the consequences of interest rate volatilities of Turkish Money Demand for the period of 1990-2000. For the completion of the study, quarterly statistics of all variables were mainly used. In calculating interest rate volatility Kenen and Rodrik proposed one of the method i.e., moving-sample standard deviation method that is also used in this study.
18 Pages(4500 words)Essay
Macroeconomic Stabilisation in Regards to Labor Market
This paper presents a research in the field of labour economics. This discipline studies how the employees and employers interact within a labour market, such that employees are the suppliers of labour services whereas the employers create the demand for them. Through salary and wages, employers hire the employees in order to generate income.
7 Pages(1750 words)Essay
How did the interest rate affect the housing prices What drives overseas investors to invest in UK housing market
For example in the UK, the base rate (repo rate) is set by the Monetary Policy Committee and the Bank of England while in the United States; the Federal Reserve sets the same Interest rates are set up after looking into several macroeconomic perspectives that affects the economy of a country.
10 Pages(2500 words)Essay
What Determines the Level of Interest Rate in the UK And How the Changes in Interest Rate Affect Economic Growth
The Determinants of the Level of Interest Rates In the UK And How the Changes in Interest Rate Affect Economic Growth Monetary policy involves alterations in the interest base rates thus influencing growth rate of aggregate demand, supply of money and ultimately the fluctuation of prices.
5 Pages(1250 words)Essay
Interest Rate SWAPS
The specified underlying or rather the fundamental asset is probable to exist in the form of forex, equity, commodity or even other existing relevant asset. There have been stated to be numerous forms of derivatives contracts that are being used among which interest rate swaps is considered to be a common form (Hunt & Kennedy, 2004).
8 Pages(2000 words)Literature review
Macroeconomic
The level of real income rose as the result of high terms of trade as well the inflation rate got reduced. The ratio between the prices of exports and the prices of imports are regarded as the terms of trade. With high rate of terms of trade the country will be able to obtain higher imports with relatively fewer amounts of exports.
6 Pages(1500 words)Essay
MACROECONOMIC
erve Bank of Australia (RBA) was established in the year 1959. The creation was put into place by the reserve bank act 1959. The act lays down the roles of these bank a puts it that this is not a profit acquisition bank. The bank introduction has seen many improvements in the economy of Australian.
4 Pages(1000 words)Essay
Interest Rate Risk Assignment
The complex financial institution that a bank has become to encompass today, joining trading activities, with the more classical lending instruments, will most likely be impacted by all these subcategories of risks. If we look at the basic lending instruments, for example a credit, the bank will lose from an increase in the interest rate through a repricing risk.
3 Pages(750 words)Essay
The influence of macroeconomic conditions on market participants
Management, financial sources, ability to advertise and communicate with its customers plays an important role in the activity of every organization. The company and marketing specialists should not focus just on microenvironment factors; macro-environment that comprises social, political, economic, legal factors is just as much important.
7 Pages(1750 words)Essay
Macroeconomic
The government’s efforts at curbing inflation have borne some benefits, though it should do more should be done since the rate of change in inflation is not directly reflected in the
12 Pages(3000 words)Essay
Let us find you another Essay on topic Macroeconomic - Market Rate of Interest for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us