Question 3

1. Open Market Operation (OMO) is one of the important tools of the central bank to control the economy. Explain how the central bank can use this tool to control inflation.

2. Explain the reasons banks borrow money from the central bank.

3. Describe Two (2) shortcomings of monetary policy.

Question 4

1. Explain flexible exchange rate, fixed exchange rate, and floating exchange rate system.

2. Explain depreciation and appreciation of the currency. List any Two (2) factors each that can depreciate and appreciate the currency?