Section A
Which of the word in italicized letters is correct in the following statement?
(a) The higher the cash and liquidity ratio, the higher/lower will be the level of bank deposits.
(b) The more the government borrows, the more/less the level of bank deposits may rise.
(c) The more cash is held by the general public, the higher/lower the level of bank deposits will be.
(d) The more government debt is held by the general public, the higher/lower the level of bank deposit will be.
2. Distinguish between the money market and capital market.
3.what is the main institutions involved in the money market.
4. How do banks settle inter-bank indebtedness
5. What is the difference between a commercial bill and a treasury bill?.
6. How do the banks create money?
7. Why need the commercial banks keep only small amount of cash relative to their liabilities?
Section B
1. What do you understand by the fiduciary issue?
2. The central bank acts as banker to government. What does this entail?
3. What is meant when the central bank is referred to as the lender of the last resort? 4. What are the main functions of a central bank?
5. How do open-market operation work?
6. What are special deposits? What is their purpose?
