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Buss 322: Money Banking And Finance Question Paper

Buss 322: Money Banking And Finance

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2011

SCHOOL : SCHOOL OF BUSINESS AND ECONOMICS
DEPARTMENT : BUSINESS ADMINISTRATION
TIME : 2 HOURS
INSTRUCTIONS • Answer Question ONE and any Other TWO Questions
Question 1
a) Towards the beginning of Great Depression the fed raised the reserve requirement. Explain how this intensified the depression while discussing the role of the bank in the national economy. (5marks)
b) Credit control is the most important function of central banks. Explain how the bank carries out this function. (10marks)
c) Discuss your understanding of the following:
i) Keynesian theory of money and prices
ii) Characteristics of a good monetary standard.
iii) Functions of capital Markets in an economy. (15marks)

Question 2
Credit creation by commercial banks is one of the most important source of income penetration. a) Suppose there are a number of commercial banks in the banking system and an individual maker a deposit of Kshs 50,000 to bank ‘A’ and ensuring a reserve ratio of 20%, show the credit creation process and combined balance sheet of banker A, B, and C. Determine the deposit multiplier and the total deposits at the end of the credit creation process. (15marks)
b) What are the assumption of the credit creation process. (5marks)

Question 3
a) Explain the various instruments use in money and capital markets. (10marks)
b) Discuss the factors that influence exchange rates. (10marks)

Question 4
a) Given the current market developments in Kenya with inflation headed to higher levels the central bank of Kenya has embarked on liquidity tightening as a tool to fight the high inflation. Discuss the measures that CBK has adopted towards this liquidity tightening. (10marks)
b) Illustrate the applications of ICTS in the banking sector. (10marks)

Question 5
Briefly explain your understanding of the following: a) Objectives of monetary policy
b) Principles of Central Banking
c) Functions of money
d) Forward rate agreements and future contract. (20marks)

Buss 322: Money Banking And Finance Question Paper

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