Question 1

Use the principles of market forces (demand and supply) to illustrate the distortions arise due to

(i) administering a price floor and

(ii) price ceiling in the market. Hint: first explain what do each concept mean, why are they applied and how do they create distortions in the market. Are there any unintended consequences due to the administration of price floor or price ceiling? You can use any product or service of your choice to illustrate your answer.(50marks)

Question 2

After the collapse of SME Bank in Namibia, the Bank of Namibia was delegated to expedite the establishment of the new institution called Namibia Deposit Guarantee Authority(NDGA). NDGA is aimed at protecting depositors in the event of a bank failure; however, some economists argue that NDGA will increase the problem of moral hazard in the banking industry. Discuss the merit and demerit of this concern, and offers solutions how the problem of moral hazard could be mitigated. (25 marks)

Question 3

Too Big To Fail! Since the aftermath of the Global Financial Crisis 2008-09 many governments around the globe have devised financial regulations to deal with the problem of Too Big To Fail (TBTF). Discuss the concept TBTF and clearly devise/propose effective regulations or strategies how to prevent banks from becoming Too Big To Fail? (25marks)