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Monetary Theory And Policy Question Paper

Monetary Theory And Policy

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
MONETARY THEORY AND POLICY
DATE: AUGUST 2011 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
Question One
a) Outline four factors that have to remain constant for Fisher Equation of exchange to apply
(10 Marks)
b) Financial intermediaries play a key role in economic development of any economy. Highlight five
such roles. (5 Marks)
c) Describe some of the consequential economic impact of high and rising interest rate in a developing
economy? (10 Marks)
d) Distinguish between excess reserves and required reserves. (3 Marks)
e) Highlight two agency functions carried out by commercial banks (2 Marks)
Question Two
a) Describe five reasons for the popularity of credit money (10 Marks)
b) The central bank is responsible for a sound financial system in any country. Briefly Explain how it
undertakes this. (10 Marks)
2
Question Three
a) Define Monetary Policy (2 Marks)
b) Identify in detail the instruments used by Central Bank to implement Monetary Policy (10 Marks)
c) Define deflation and Illustrate instruments that can be used to curb it. under which (8 Marks)
Question Four
a) Write notes on:
i) Liquidity trap
ii) Deflation Versus Disinflation
iii) Phillip’s Curve
iv) Commodity money
v) Inflation Versus Reflation
(10 Marks)
b) Demands for money is made to facilitate the trading activities .Briefly discuss the determinants for
the transactional demand for money. (10 Marks)
Question Five
a) Identify and illustrate using examples on the various types of inflation (10 Marks)
b) Outline five functions of money (5 Marks)
c) Discuss the limitations of the monetarist’s theories with specific references to Keynes. (5 Marks)
3

Monetary Theory And Policy Question Paper

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