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Cfm 302: Monetary Theory And Policy Question Paper

Cfm 302: Monetary Theory And Policy

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

1
UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE 2 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFM 302: MONETARY THEORY AND POLICY (SUNDAY CLASS)
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and Any other TWO Questions
QUESTION ONE
a) “Money is the pivot a round which the economics science cluster” Discuss (5 Marks)
b) Discuss why money is considered a “Source of blessing and evil” (5 Marks)
c) Outline five causes of banking crisis in Kenya ( 5 Marks)
d) Discuss how global financial problems likely to affect Kenyan Economy (5 Marks)
e) “The value of money, like the value of anything, is mainly a question of demand and supply.
Explain. ( 5 Marks)
f) Highlight five roles played by financial intermediaries in terms of economics development in
Kenya. ( 5 Marks)
QUESTION TWO
a) Identify and explain six factors that determine the supply of money in an economy.
( 6 Marks)
b) Explain the concept of liquidity traps. ( 6 Marks)
c) Discuss the impact of expansion of any monetary policy to an economy
(8 Marks)
2
QUESTION THREE
a) What are the principle functions of the Central Bank? How does the Central Bank protect other
Banks from failures?
(10 Marks)
b) Comments on how commercial bank aim at resolving conflict between liquidity and
profitability.
(5 Marks)
c) What precaution should be taken by the Banks while giving loans and advances to its customer.
( 5 Marks)
QUESTION FOUR
a) Critically examine Fisher’s Quantity Theory of money. ( 8 Marks)
b) Why does Keynesian give so much importance to liquidity preference in determining the
interest rate. ( 4 Marks)
c) Show how Fruedman has tried to rehabilitate the quantity theory of money.
(8 Marks)
QUESTION FIVE
Write notes on the following:-
a) Why cheques, credit card not considered as money.
b) Credit creation
c) Money is what money does
d) How far is the cash balance approach superior to the cash transaction approach to the value of
money.
(20 Marks)

Cfm 302: Monetary Theory And Policy Question Paper

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