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EC 371 Review Questions

The document is a review for a monetary economics course that includes 15 questions about key monetary concepts and terms. It begins by defining monetary aggregates like base money, money supply, and credit money. It then asks students to differentiate between concepts like fully-boded vs token money. Other questions cover the functions of money, money multipliers, credit creation, and how the actions of commercial banks and the central bank impact money supply.

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35 views

EC 371 Review Questions

The document is a review for a monetary economics course that includes 15 questions about key monetary concepts and terms. It begins by defining monetary aggregates like base money, money supply, and credit money. It then asks students to differentiate between concepts like fully-boded vs token money. Other questions cover the functions of money, money multipliers, credit creation, and how the actions of commercial banks and the central bank impact money supply.

Uploaded by

millymchanga48
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SCHOOL OF ECONOMICS

UNIVERSITY OF DAR ES SALAAM

EC: 371 Monetary Economics


Topic 1: Introduction:
– Nature, history, origin, evolution, functions, importance and
definitions of money.

Review Questions

1. By using standard notations define and explain the importance of following


monetary aggregates:
i) Base money or High powered money or Monetary base
ii) Narrow definition of money supply
iii) Broad definition of money supply
iv) Extended broad definition of money supply
v) IOU
vi) Double coincidence of wants
vii) Fiat money
viii) Intrinsic value
ix) Credit money
x) Demand deposit
xi) Currency substitute

2. Differentiate the following concepts


a. Fully boded vs token money
b. Uncoined metals vs coined metal
c. Near money vs money substitute

3. Differentiate between static and dynamic functions of money


4. Explain primary vs secondary functions of money
5. What is money multiplier? What are the determinants of money multiplier?
6. Discuss the ultimate determinants of
7. What are the advantages of money?
8. Discuss the qualities of good money
9. How can behaviour of the general public affect money supply?
10. What is credit creation? With example explain credit creation process.
11. What are the limitations of credit creation process?
12. Why do we say that base money or high powered money is the central bank
liability?
13. The TK Bank has demand deposits of TZS 450,000 billion and TZS 150,000 total
reserves. The reserve ratio is 20%. What is the deposit multiplier for this system?
14. Suppose TK Bank receives a primary deposit of TZS 100,000 million. How much
deposit creation takes place for the entire banking system, given the cash Cash
reserve requirement is 100%?

MT/Nov. 2023
15. Collin holds TZS 100 million cash in his TK bank current account. Suppose the
required reserve ratio 50%, what amount of new money could the bank create
when it lends out the excess reserves?
16. Can the central bank have full control over money supply? If yes How? If no
why?
***

MT/Nov. 2023

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