Effects of Australian Government's Capital Increase to the Reserve Bank of Australia in 2014
What were the effects of the Australian Government's decision to add to the capital of the RBA in 2014?
a) Increased the net financial assets of the RBA, left unchanged the net financial assets of the Government, and increased the net financial assets of the consolidated government sector
b) Increased the net financial assets of the RBA, left unchanged the net financial assets of the Government, and reduced the net financial assets of the consolidated government sector
c) Left unchanged the net financial assets of the RBA, reduced the net financial assets of the Government, and reduced the net financial assets of the consolidated government sector
d) Increased the net financial assets of the RBA, reduced the net financial assets of the Government, and left unchanged the net financial assets of the consolidated government sector
e) Left unchanged the net financial assets of the RBA, left unchanged the net financial assets of the Government, and left unchanged the net financial assets of the consolidated government sector
Answer:
The correct option for the given question is: increased the net financial assets of the RBA; left unchanged the net financial assets of the Government, and; increased the net financial assets of the consolidated government sector.
The Reserve Bank of Australia (RBA) is the country's central bank responsible for monetary policy. In 2014, the Australian government made a decision to add to the capital of the RBA. This entailed debiting the Government's official public account at the RBA, resulting in specific effects:
Effects of the Australian Government's Capital Increase to the RBA:
1. The net financial assets of the RBA increased due to the capital injection.
2. The net financial assets of the Government remained unchanged as there was no direct impact on its financial assets from the capital increase.
3. The consolidated government sector, comprising both the Government and the RBA, experienced an increase in net financial assets as a result of the capital injection.
This decision represents a strategic move to strengthen the financial position of the RBA and enhance its capacity to carry out effective monetary policy in Australia. By increasing the capital base of the central bank, the Australian government aims to support the RBA in fulfilling its mandate of promoting price stability, full employment, and the economic prosperity of the nation.