Read this article from the link and answer the questions at the end.
1. Why would banks tend to lend more in booms and less in downturns?
2. What do these proposals mean for the RBA’s policy of targeting inflation?
My teacher wants me to follow his hints. These are:
1.Identify the determinants of the demand and supply for bank lending.
Describe the role of the reserve-to-deposit ratio in the factional banking system.
Explain how the money multiplier fits in the fact that lending increases during the boom but decreases during the downturn.
2.What was the key policy proposal from the Basel Accord?
Identify the effects of Basel Accord on the size of the money multiplier.
Use the quantity theory of money to explain how the Basel Accord can help the RBA to stabilise inflation.
Hope you will answer these questions as soon as possible.
Thank you very much!!!