vegetable-mania
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- Sep 19, 2004
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Quick Question: What is Cash Rate?
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Cash Rate (1 Viewer)
- Thread starter vegetable-mania
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kikujiro
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- Apr 30, 2004
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the cash rate is the minimum interest rate(the smallest possible interest rate) and is the foundation of all other interest rates.
It's determined by the RBA and achieved through the buying and selling of second hand government bonds in the short term money market.
It's determined by the RBA and achieved through the buying and selling of second hand government bonds in the short term money market.
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does anyone know anything about the cash rate diagram?
Yes, it is a basic supply and demand diagram. The RBA acts to shift the Money Supply Curve using its Domestic Market Operations. A tightening of monetary policy implies a decrease in money supply and vice versa. The price of money (y-axis) is the cash rate! Another thing, money supply is constant (ie: it is a straight vertical line). The demand curve is still downward sloping. If any further points need clarifying, I am happy to assist.
Conspirocy
Member
i really dont think you should use the cash rate diagram unless you have been taught it at school, or you sit down and learn it from a teacher.
- this is because sure while you could go and memorise this one diagram, you wouldnt fully understand it, and its not as simple as whats actually there, there is a lot more to it.
- second, because you dont have to actually use the diagram to write a good essay on monetary policy (im assuming thats why u want the diagram) --> you could just talk through the stages from the RBA changing the cash rate, and the after effects
thats just me...im jeleous of the diagram i guess
- this is because sure while you could go and memorise this one diagram, you wouldnt fully understand it, and its not as simple as whats actually there, there is a lot more to it.
- second, because you dont have to actually use the diagram to write a good essay on monetary policy (im assuming thats why u want the diagram) --> you could just talk through the stages from the RBA changing the cash rate, and the after effects
thats just me...im jeleous of the diagram i guess
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Is there more to the determination of the cash rate than what is taught in HSC Economics? If so, do you learn about it at uni if you do a BCom or BEcon?Conspirocy said:
Conspirocy
Member
first of all in high school i got taught using the dixon book. i didnt get taught the above cash rate diagram, so for me there was more to learn in university economics which im doing now.
so, yes and no like im saying that all the stuff about the cash rate and its diagrams you dont need to know to get a band 6.
you learn the basic fundementals, and how to describe the cause and effect.
- like you could go into the payments system more
- you could learn some of the mathematics behind what happens when you influence the momey suppy
- you could go into the in the second round effects rather than the initial change
what im trying to say is, you can get a band 6 by just understanding the relationships as second nature, like a rise in cash rate, is caused by reducing the money supply so the RBA sells government securities. this leads to an increase in the cost of money (interest rate) so then a fall in consumer and business spending leads to a fall in aggregate demand and a reduction in inflation. i wrote like this in my hsc, and while now after getting taught the diagrams at uni it makes perfect sense to use a diagram. At the HSC level there was no need for me to do so.
it also depends on how you were taught aggregate demand and supply
- riley textbook has a different way to the AS-AD model, different to what without wings used with the 45 degree angle for AS
but overally, yes at university you do learn more about economics in general and even though you might already know some things (like the cash rate diagram) you might not have been expected to know them until now.
hope that answers your question
so, yes and no like im saying that all the stuff about the cash rate and its diagrams you dont need to know to get a band 6.
you learn the basic fundementals, and how to describe the cause and effect.
- like you could go into the payments system more
- you could learn some of the mathematics behind what happens when you influence the momey suppy
- you could go into the in the second round effects rather than the initial change
what im trying to say is, you can get a band 6 by just understanding the relationships as second nature, like a rise in cash rate, is caused by reducing the money supply so the RBA sells government securities. this leads to an increase in the cost of money (interest rate) so then a fall in consumer and business spending leads to a fall in aggregate demand and a reduction in inflation. i wrote like this in my hsc, and while now after getting taught the diagrams at uni it makes perfect sense to use a diagram. At the HSC level there was no need for me to do so.
it also depends on how you were taught aggregate demand and supply
- riley textbook has a different way to the AS-AD model, different to what without wings used with the 45 degree angle for AS
but overally, yes at university you do learn more about economics in general and even though you might already know some things (like the cash rate diagram) you might not have been expected to know them until now.
hope that answers your question
Conspirocy
Member
well there you go, looks like you need to know itDeus said:
glad i didnt get it in the hsc