Financial market and institution

QUESTION 1

Why would economic growth affect the value of stock? (20 MARKS)

QUESTION 2

"Commercial Bank can create money, contrastingly Central Bank can print money." Elaborate this statement (20 MARKS)

QUESTION 3

Why might "inflation targeting" increase support for the independence of the central bank to conduct monetary policy?(20MARKS)

QUESTION 4

"The lessons from the global financial crisis suggest that monetary policy should lean against credit but not asset-price bubbles." Elaborate in detail.(20marks)

QUESTION 5

In which economic conditions would a central bank want to use a "forward guidance" strategy? Based on your answer, can we easily measure the effects of such a strategy? (20 MARKS)

QUESTION 6

How Fed actions affect reserves in the Banking System (10 MARKS)

QUESTION 7

1.Assume that you have the following figures and information:

Required Reserve Ratio 0.10

Currency in Circulation $ 400 billion

Checkable Deposits $ 800 billion

Excess Reserve $ 0.8 billion

Money Supply (M1) $ 1200 billion

You are required to calculate and solve the following problem[10 marks]

a)Currency Ratio (c )

b)Excess Reserves Ratio (e)

c)The Money Multiplier (m)