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QUESTION 22 B2 Victoria Credit Bank (VCB) issues bonds to households who are not depositors in that bank. VCB makes a loan to a commercial

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QUESTION 22 B2 Victoria Credit Bank (VCB) issues bonds to households who are not depositors in that bank. VCB makes a loan to a commercial company, Rio Tinto, which is a depositor in that bank. Rio Tinto is funding the forage of a new mine. The households fund their investment with accumulated past savings and hold their bank deposits in Northern Territory Credit Bank (NTCB). a) Using a flow of funds diagram incorporating the surplus spending units, deficit spending units, financial intermediary, financial markets and payment system illustrate how the funds and the financial instruments circulate in the financial system. In your diagram make a clear distinction between bank deposits and ESF, and indicate money and instrument creation/destruction where relevant (9 marks) b) Explain whether there is channelling of funds and transit of funds. (1 mark) Write your answers on a new sheet of paper preferably without lines, write your full name and student number at the top of the sheet; scan or take a photo convert into pdf and upload one pdf file on the link below. Keep the sheet with your answers for future reference QUESTION 22 B2 Victoria Credit Bank (VCB) issues bonds to households who are not depositors in that bank. VCB makes a loan to a commercial company, Rio Tinto, which is a depositor in that bank. Rio Tinto is funding the forage of a new mine. The households fund their investment with accumulated past savings and hold their bank deposits in Northern Territory Credit Bank (NTCB). a) Using a flow of funds diagram incorporating the surplus spending units, deficit spending units, financial intermediary, financial markets and payment system illustrate how the funds and the financial instruments circulate in the financial system. In your diagram make a clear distinction between bank deposits and ESF, and indicate money and instrument creation/destruction where relevant (9 marks) b) Explain whether there is channelling of funds and transit of funds. (1 mark) Write your answers on a new sheet of paper preferably without lines, write your full name and student number at the top of the sheet; scan or take a photo convert into pdf and upload one pdf file on the link below. Keep the sheet with your answers for future reference

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