Main goals of monetary policy in australia

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1. Define monetary policy and describe the main goals of monetary policy in Australia?

2. Explain why a central bank would reduce interest rates. How would a cut in interest rates affect each of the components of aggregate demand? Use the AD/AS model to illustrate the effect of a cut in interest rates on the economy.

3. What are externalities? Using examples explain the difference between consumption and production externalities and between positive and negative externalities. Choose one example of an externality and using a diagram show how the market fails to produce the efficient quantity.

4. Distinguish between public goods and common resources. Explain why each of these goods can cause the market to fail.

5. What is asymmetric information? Using examples, distinguish between adverse selection and moral hazard and explain why each can result in market failure.

Reference no: EM132171664

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