Y6

1. Some companies go public by listing their new shares in the stock exchange (sometimes called IPO). A lot of people apply to buy the new shares. They write checks to the companies, and wait for the application results. Draw a diagram of money supply and demand to illustrate what happens before the announcement of application results to explain. What should the central bank do if it intends to maintain a stable interest rate? Illustrate this in the diagram and explain.

2. Suppose that a centra bank issues a new type of electronic coupons, each worth $100. It can be stored in an e-system of smart phone. Whoever gets it can require the central bank to return $100 notes to the coupon holder. The coupons can be transferred via the e-system via phone from one person to another, and can be deposited in banks for later withdrawal as notes or for writing checks. What is the nature of this coupon in economics? Will issuing these coupons affect money supply, and how? Will money multiplier effect be involved and why?