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Buss 322: Money Banking And Finance Question Paper

Buss 322: Money Banking And Finance

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2011

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT : BUSINESS ADMINISTRATION
TIME : 2 HOURS
INSTRUCTIONS Answer Question ONE and any Other TWO Questions

Question 1
a) Evidence shows that interest rates rise during expansions and fall during economic contractions. Explain this statement using treasury bills and bonds (6marks)
b) Assume that the central bank of Kenya implements a favourable fiscal policy with the help of a diagram, show how corporates will benefit (6marks)
c) How does the treasury effect monetary policy during politically oriented times such as an election year or when the nation is at war. Justify your assertions (6marks)
d) Explain the role of banking regulations from the point of view of the Bretton Wood Institutes (6marks)
e) What do you understand by the term central bank independence? How does the treasury influence it? (6marks)

Question 2
What is unit and branch banking, contrast between the two while giving relevant instances. (20marks)

Question 3
a) Briefly explain the concept of commercial banks reserve multiplier. (4marks)
b) Using an illustration, explain the process through which commercial banks create credit and outline the major factors that limit this credit creation (16marks)

Question 4
a) Elucidate the merits and demerits of various forms of money (10marks)
b) Capital market in Kenya has expanded over the last few years. This expansion is due to the initiatives of the capital markets authority and the introduction of new financial instruments.
Required:
i) What are the roles of the capital markets authority (6marks)
ii) While giving examples explain the meaning of the term “financial instrument” (4marks)

Question 5
With the aid of examples, explain the main components of financial markets (20marks)

Buss 322: Money Banking And Finance Question Paper

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