2. (a) In response to the Covid-19 pandemic central banks, for instance the Federal Reserve Bank and the Bank of England, lowered their policy rates to nearly zero, took extraordinary steps to calm financial markets and greatly expanded their balance sheets as a result. i. Concerns on whether central banks engaged in monetary financing have risen. Explain what is monetary financing and discuss whether these concerns are warranted. [10 marks] ii. In addition to expanding their balance sheets both central banks adopted forward guidance as a policy. With the aid of relevant diagrams, discuss how forward guidance can lead to economic expansion and avoiding a deflationary trap. [15 marks] (b) Explain how mobile banking has promoted financial inclusivity in Kenya and its benefits to financial markets in the country. [10 marks] 2. (a) In response to the Covid-19 pandemic central banks, for instance the Federal Reserve Bank and the Bank of England, lowered their policy rates to nearly zero, took extraordinary steps to calm financial markets and greatly expanded their balance sheets as a result. i. Concerns on whether central banks engaged in monetary financing have risen. Explain what is monetary financing and discuss whether these concerns are warranted. [10 marks] ii. In addition to expanding their balance sheets both central banks adopted forward guidance as a policy. With the aid of relevant diagrams, discuss how forward guidance can lead to economic expansion and avoiding a deflationary trap. [15 marks] (b) Explain how mobile banking has promoted financial inclusivity in Kenya and its benefits to financial markets in the country. [10 marks]