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Week 6 - Coggle Diagram
Week 6
Cash Rate
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This is a key source of funds for bank liquidity. the RBA cash rate derives around 65% of bank funding
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Financial Regulation
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What is it?
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Promotes participation, confidence and growth
In conclusion
When the economy weakens, the RBA can lower the cash rate, which lowers the cost of debt, stimulating consumption and investment. This is called expansionary policy
When the economy overheats, the RBA can increase the cash rate, which increases the cost of debt, dampening consumption and investment. This is calles contractionary monetary policy