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The Reserve Bank of Australia’s (RBA) activity has had an impact on every one of us, whether it be from when the former said 2020’s low- made it a “good time” for first home-buyers to enter the housing market, or the subsequent tightening of monetary policy that led to 13 interest rate increases in just 18 months (the latter making the former not so great advice for some).
A recent report by Your Financial Wellness found 60 per cent of people , like those relating to and interest. Scott Pape, better known as The Barefoot Investor, said his 10-year-old son managed to almost ace a six-question quiz put out by the RBA to gauge Australia’s economic knowledge.
But how do you think you would go? Here are the questions.
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1. As far as you know, during a recession in an economy, there would normally be an increase in:
a) imports
b) unemployment
c) economic growth
d) business spending
2. Say wages in the economy increased by 5 per cent and prices increased by 7 per cent. As far as you know, in terms of the goods and services they can buy, a worker would be:
a) better off
b) worse off
c) neither better nor worse off
3. As far as you know, all else equal, which would usually increase total spending in the economy? An increase in:
a) tax rates
b) consumer caution
c) the savings rate
d) business investment
4. As far as you know, all else equal, a decrease in interest rates provides an incentive for people to:
a) save more and borrow more
b) save less and borrow less
c) save more and borrow less
d) save less and borrow more
5. As far as you know, which monetary policy would the RBA most likely adopt if the economy moved into recession during a period of low inflation?
a) increase income taxes
b) lower the cash rate
c) decrease purchases of government bonds
d) reduce spending on public infrastructure projects
6. As far as you know, what is the Reserve Bank of Australia’s target range for inflation?
(a) 0–1 per cent
(b) 1–2 per cent
(c) 2–3 per cent
(d) 3–4 per cent
(e) 4–5 per cent
(f) 5–6 per cent
(g) 6–7 per cent
(h) 7–8 per cent
(i) 8–9 per cent
(j) 9–10 per cent
(k) don’t know / uncertain
The answers are below.
Why does it matter?
This was the justification Pape’s son had for not landing the final question:
“Well, the first five questions don’t require any real financial knowledge … it’s just logic. Though the final question on the RBA needed technical knowledge that I don’t have.”
Here’s a chart showing how other Australians went with the quiz.
Pape said “wealthy white dudes got the highest scores” while younger unemployed people without a degree had the lowest scores. This may seem obvious, but he said it highlighted a glaring problem for Australia.
“Young people leave school without knowing this stuff … so they never learn it,” he said.
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“Given the RBA’s operating costs were $500 million last financial year, surely they could snaffle a few deniros to set up and run a program and teach all Aussie school kids basic financial life skills?”
Your Financial Wellness chief executive Alex Hassall likened the disparity of financial knowledge to the “haves and have-nots” and said the Australian government needed to focus on making sure taxpayers were armed with the knowledge to create a “brighter future for everyone”.
“It is clear from our analysis that fostering financial-literacy skills needs to be a greater priority. Like wearing a hat and using sunscreen in the sun, financial literacy needs to become just as automatic,” he said.
ANSWERS:
1 (B), 2 (B), 3 (D), 4 (D), 5 (B), 6 (C)
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