MERU UNIVERSITY OF SCIENCE AND TECHNOLOGY

P.O. Box 972-60200 – Meru-Kenya.

Tel: +254 (0)799529958, +254 (0)799529959, +254 (0)712524293
Website: www.must.ac.ke Email: info@must.ac.ke
University Examinations 2019/2020

THIRD YEAR, FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR

OF SCIENCE IN ECONOMICS AND BACHELOR OF COMMERCE

BEC 3303 –ECONOMICS OF MONEY AND BANKING / MONEY AND BANKING

DATE: DECEMBER 2019 TIME: 2 HOURS

INSTRUCTIONS: Answer question one and any other two questions.

QUESTION ONE (15 MARKS)

a) Discuss the problems of banking system of trade and suggest ways that money has sorted
out these problem. (5 Marks)
b) Discuss the process of credit creation. (5 Marks)
c) Explain the role of central bank in an economy. (5 Marks)
d) Describe five financial intermediaries in Kenya. (5 Marks)
e) Differentiate between the following;
(i) Commercial bank and non financial institution (2 Marks)
(ii) Monetary policy and fiscal policy (2 Marks)
(iii) Current account and saving account (2 Marks)
(iv) Bank rate policy and interest rate (2 Marks)
(v) Money velocity and currency circulation (2 Marks)

QUESTION TWO (20 MARKS)

a) What monetary and fiscal policies can a government adopt to reduce inflation(10 Marks)
b) Explain indicators of monetary policy. (10 Marks)

QUESTION THREE (20 MARKS)

a) Describe the various measurement of money supply in the economy. (10 Marks)

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b) Discuss the economic impact of increasing money supply in an economy.(10 Marks)

QUESTION FOUR (20 MARKS)

a) Differentiate the following ;

(i) Quantity theory of monetary and Keynesian liquidity preference theory of money
demand (5 Marks)
(ii) Devaluation and depreciation of currency (5 Marks)
b) Explain four basis of classification of Banks give examples under various classes
(10 Marks)

QUESTION FIVE (20 MARKS)

a) Describe the history, evolution and development of money (10 Marks)

b) Discuss the current and future trends of money and banking. (10 Marks)

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