Eae 310: Economic Of Money Banking Question Paper

Eae 310: Economic Of Money Banking

Course:Bachelor Of Economics

Institution: Kenyatta University question papers

Exam Year:2011

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
OPEN DISTANCE AND e-LEARNING
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF ECONOMICS
EAE 310: ECONOMIC OF MONEY BANKING
DATE: Friday 16th December 2011 TIME: 4.30p.m-6.30p.m
INSTRUCTIONS
Answer question ONE and any OTHER TWO
1. a) What are the advantages of using money in an exchange economy over the
barter system? [15marks]
b) Explain the neutrality of money concept. [5marks]
c) What are the consequences of increasing money supply in an economy that
has already attained full employment level. Use appropriate diagrams to support your answer. [10marks]
2. a) Distinguish between simple and complex money multipliers. [8marks]
b) Discuss any four instruments of money supply control. [12marks]
3. a) Using appropriate diagram(s) illustrate and explain the determination of
interest rates in a money market. [14marks]
b) What do you understand by FIAT money? [6marks]
4. a) To what extent does increases in money supply affect the domestic exchange rate. [10marks]
b) Does mergers of non-financial institutions always lead to increased efficiency in banking sector? [10marks]
5. a) Explain the demand for money according to Keynesian liquidity
preference theory. [12marks]
b) Illustrate and explain the implications of a reduction of money supply when an economy is experiencing a liquidity trap. [8marks]

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