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Money And Banking Question Paper

Money And Banking

Course:Bachelor Of Commerce (Commerce)

Institution: Kabarak University question papers

Exam Year:2012

KABARAK
UNIVERSITY
UNIVERSITY EXAMINATIONS
2011/2012 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF COMMERCE
FNCE/ECON 313: MONEY AND BANKING
DAY: WEDNESDAY

DATE: 8/08/2012
TIME: 3.00 – 5.00 P.M.

STREAM: Y3S1
INSTRUCTIONS:
? Attempt question ONE and any other TWO questions.
QUESTION ONE
a) Discuss the relationship between the prices of goods and money supply according to the
quantity theory of money (6mks)

b) Credit money is one of the stages in the evolution of money that has not been enjoyed in
Kenya. Discuss the factors contributing to this and the steps being taken by the Kenyan
government to rectify this scenario ( 6mks)

c) In its static role, the importance of the money lies in removing the difficulties barter. Discuss
how the use of money overcomes those difficulties. ( 6 mks)

d) Discuss the goals of monetary policy in Kenya ( 8mks)

e) Today Commercial Banks practice fractional banking whereby they keep part of the money
deposited by customers to meet the normal customer withdrawal while they lend the rest to
interested borrowers. Explain the advantages of this practice ( 4mks )

(30 mks)
Page 1 of 3

QUESTION TWO
a) There are three alternative views regarding the definition of money supply. Discuss them.
(6mks)

b) With every increase in the money supply, the bank credit goes up. However, it may not happen
in exactly the same proportion .Discuss the factors responsible for this. (6mks )

a) In the budget read in parliament by the minister of finance for the year 2012/2013, there is a
budget deficit. The government may decide to bridge the gap through increased domestic
borrowing .Explain how this could affect Kenya’s economy (8 mks)
(20 mks)

QUESTION THREE
a) Discuss the extent to which monetary policy in Kenya has been used to bring about economic
growth in the country. (6 mks)
b) The inflation rates in Kenya had reached a high of about 23% towards the end of 2011.Discuss the
effects this high inflation could have had on distribution of income and wealth in Kenya
(6 mks)

c) There are various ways that can be employed to control inflation. Apart from fiscal and monetary
measures discuss the other ways which can be employed by the government to control inflation
(8mks)

(20 mks)
QUESTION FOUR
a) Discuss the services offered to the Government by the central Bank as its banker. (4mks)

b) Proper adjustment between demand for and supply of money is very important for the economic
growth of the Kenyan economy. Discuss this statement showing clearly the effects of any
disequilibrium between the demand for and supply of money in the economy (6mks)

Page 2 of 3

c) One of the roles of the central bank in a developing economy is solving the balance of payment
problem. Discuss the various steps that can be undertaken by the central bank to achieve this goal.
(10 mks)
(20 mks)
QUESTION FIVE
a) Kenya saving ratio is currently at about 17% of the GDP. Discuss the reasons why increasing
the savings ratio to about 30% of the GDP as targeted in Kenya’s vision 2030 is critical to
Kenya’s economic growth ( 4mks)
b) Commercial banks not only perform the core functions of accepting deposits and lending but
also offer other services such as the agency services. Discuss the main agency services they
offer to their clients. (6mks)
c) Among the recent innovations in the banking sector is the introduction of mobile money.
Discuss the possible effects of this innovation on Kenya’s banking industry (10mks )
(20 mks)
Page 3 of 3

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