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Hbc 2222: Monetary Theory Question Paper

Hbc 2222: Monetary Theory

Course:Bachelor Of Commerce

Institution: Meru University Of Science And Technology question papers

Exam Year:2012

Meru University of Science and Technology

University Examinations 2012/2013

THIRD YEAR, FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF

COMMERCE

HBC 2222: MONETARY THEORY AND PRACTICE

QUESTION ONE (30 MARKS)
a) Differentiate between money and individual wealth. (2 Marks) b) Explain the term aggregate demand and aggregate supply (5 Marks) c) Explain four functions of money. ( 8 Marks) d) Suppose that monetary base (B) is Ksh. 1,000 billion, the reserve deposit ratio (VV) is 0.2 and the currency-deposit ratio is 0.12. Find the total money supply. ( 5 Marks) e) Explain any five functions of a central bank (10 Marks)
QUESTION TWO (20 MARKS) a) With an aid of a diagram explain two factors or events that cause shifts in aggregate demand curve. ( 6 Marks) b) Differentiate between adaptive expectation and rational expatiations. ( 4 Marks) c) Explain the main objectives of monetary policy undertaken by central bank. ( 10 Marks)
QUESTION THREE (20 MARKS) a) Suppose suddenly firms experience an increase in the costs of production as a result of increase in price of petroleum and electricity bills. As a result of this aggregate supply curve shifts to the left. Illustrate this shift in an aggregate demand (AD)- aggregate supply (AS) model. Discuss the effects of this shift on price level and income or output . ( 10 Marks) b) Explain the relationship between inflation and economic growth ( 6 Marks) c) Differentiate between monetary policy and fiscal policy. ( 4 Marks)
QUESTION FOUR (20 MARKS)
a. Explain the meaning of the following terms as used in the model of the money supply: i. The monetary base. (3 Marks) ii. The reserve deposit ratio. (3 Marks) iii. The currency deposit ratio. (3 Marks) b. Keyner identified three motives for holding money, state and explain the three motives he identified. (9 Marks) c. State two properties of money.

Hbc 2222: Monetary Theory Question Paper

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