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Monetary Theory &Amp; Policy Question Paper

Monetary Theory &Amp; Policy

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2011

UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
MONETARY THEORY & POLICY
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
Question one
a) Discuss the effectiveness of qualitative credit controls in emerging Kenyan money markets.
(5 Marks)
b) Explain how the Kenyan economy would be affected by the expansion of the monetary policy
(5 Marks)
c) ‘’Keynesians believe that the best way to increase aggregate demand in the society is by rising
Government spending’’. Discuss. (7 Marks)
d) Discuss the socio-economic effects of the current rising interest rates. what impact does it have
in the future projections of the country (8 Marks)
e) With specific illustration, discuss how the Central Bank act as a philosopher to other Banks.
(5 Marks)
Question two
‘’The Cambridge equation is not the quantity theory in a new algebraic form. But it
represents a fundamentally new approach to the problem of money and prices.’ Examine this
statement.
(20 Marks)
2
Question Three
a) Money is demanded for its medium of exchange and store of value function. Discuss.
(4 Marks)
b) Discuss the limitations of money market in a developing economy (6 Marks)
c) Explain the assumptions of Fisher’s Equation of exchange (4 Marks)
d) Identify and explain four factors that determine the demand for money in an economy.
(6 Marks)
Question four
a) Describe the process of crowding out of excess money in the economy, detailing the tools
employed by the Kenyan Central bank monetary committee to facilitate the process.
(10 Marks)
b). One of the attempts made by the Kenya government to tame the free falling shilling is to seek
for additional dollars from the IMF. What are the long term and short term effects of this move to
the country (10 Marks)
Question five
a) Compare and contrast J M Keynes income theory (saving investment theory of value of
money) and Fisher’s quantity theory of money? (10 Marks)
b) Why is credit money not popular in Kenya and how does it impact on the value of the
currency. (6 Marks)
c) Analyze the role played by non banking financial institution in promoting economic growth.
(4 Marks)

Monetary Theory &Amp; Policy Question Paper

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