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In: Economics

What role does the Reserve Bank of Australia (RBA) have in the economy? Explain what open...

What role does the Reserve Bank of Australia (RBA) have in the economy? Explain what open market operations are.

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Expert Solution

Reserve Bank of Australia was functioned on the basis of the Reserve Bank Act in 1959. They maintain the stability of currency, full level of employment and economic prosperity among the Australian welfare of the people. Promotion of overall stability of the economy is considered as the major role of RBA. Proper management and providing liquidity among the institutions and the regulation of the payment system are also under consideration. The monetary policy was effectively managed and functioned by the central bank of Australia. The efficient payment system directed to a great advantage among the people in Australia. The promotion of competition in the market for payment services ensures the stability of financial system.
Open market operations are the activities done by central bank to ensure liquidity of the currency in the economy. This can be used as a regulator to control the money supply in an economy. There is an exchange of government securities and treasury bills were run here. For example, the RBA wish to buy more securities from the commercial bank, to make a control over the money supply and to regulate the inflation in the economy.


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