Hbc2222:Monetary Theory Question Paper
Hbc2222:Monetary Theory
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESTION ONE
(a) State and explain the primary functions of Money. (10Marks)
(b) State the assumptions of the quantity theory of money. (5Marks)
(c) Explain the anti-inflationary measures and state two examples in each category. (6Marks)
(d) Explain the liquidity trap and explain the relationship between interest rate and money demand. (5marks)
(e) State the types of inflation. (4Marks)
QUESTION TWO
(a) Discuss the various theories that explain the value of money. (15Marks)
(b) State and explain the fiscal measures. (5Marks)
QUESTION THREE
(a) (i)
(ii) (10Marks)
(b) Discuss reasons why people hold money. (10Marks)
2
QUESTION FOUR
(a) (i) The commodity and money of a given economy are presented hypothetically below: C Consumption
I = 2000 – Investment
Lt Transaction Demand
Ls = 10- .. Speculative Demand
Ms Money Supply
Required:
(a) Derive the IS curve. (3Marks)
(b) Derive the Lm curve. (3Marks)
(c) Derive the equilibrium level of income and interest rate. (4Marks)
(d) If the money supply was increased by 50, what would be the National Income and Interest Rate? (4Marks)
(ii) Explain the tools of monetary control. (6Marks)
QUESTION FIVE
(a) State the components of money supply in Kenya. (6Marks)
(b) Explain the stages of money development. (8Marks)
(c) Distinguish between:
(i) Standard money – Vs – Token money
(ii) Credit money – Vs – Legal transfer
(iii) Gold currency standard – Vs – Gold parity standard. (6Marks)
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