UNIVERSITY SCHOOL LONDON
ASSESSMENT FOR INNER STUDENTS
Money and Bank
two hours 0 Minutes
В©2011 University College or university London
ECON7003. FUNDS AND BANK. Exam, Summertime 2012.
PERIOD ALLOWANCE: TWO HOURS
The exam is within two parts.
Part A accounts for 35 marks.
Component B makes up about 70 signifies.
Answer BOTH questions simply A.
Answer TWO inquiries from Component B.
In situations where a student answers more queries than asked by the assessment rubric, the policy from the Economics Office is that the present student's first set of answers up to the required amount will be the ones that rely (not the very best answers). All remaining answers will be ignored. PART A.
Answer EQUALLY questions with this Part, which usually accounts for 35 marks.
Ing. Use Phillips Curves plus the Central Bank's indifference figure to illustrate diagrammatically the disinflation strategy of:
(a) a central bank that has an absolute antipatia to inflation; (b) a strongly inflation-averse (`hawkish') central bank;
(c) a strongly unemployment-averse (`dovish') central lender.
Specify the advantages of the previously mentioned framework above the simple ISLM framework with respect to:
(a) the central bank's preferences;
(b) the supply side of the economy;
(c) the representation in the medium run.
A2. We certainly have a situation where the non-bank general public has a cash-to-deposits ratio of 25%, and banks have got a needed reserves proportion of 3%. Bank A has an surplus reserves proportion of zero. 03%.
(a) What is the bucks multiplier encountered by Lender A beneath these situations? (b) Employing numerical illustrations, discuss the likely effects on this multiplier of the following circumstances (assuming ceteris paribus in each case): (i) The bank grows its procedures in the field of economical derivatives; (ii) There is a within the deal costs received by financial institutions in altering their balance sheets.
(iii) The nonbank public concerns a banking crisis and a traditional bank 'panic' happens. 13 Markings
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Solution TWO of the questions in this Part, which accounts for 75 marks. Every answer carries equal weight, i. e. 35 represents.
Bl. Outline some prominent popular features of the history of monetary theory in terms Volume Theory pounds. In your answer, briefly summarize Friedman's 'restatement' of the theory, and explain the position it takes on in his analyze of Keynesian demand supervision policy.
B2. Assess the degree to which the British government's monetary coverage during the 1970s and 1980s was in conform with the regle of monetarism. What is `Goodhart's Law', and what was the place of this 'law' in debates about the respective merits of guidelines and discretion in economic policy?
B3. Assess the record of the institutional reforms that have been made with respect to the role of the Bank of Britain in financial policy seeing that 1992. To what extent include these reconstructs been successful in establishing an effective balance between targeting pumpiing and regulating output in the economic cycle? What highlights of the world overall economy have influenced the relationship between these two desired goals in this period?
B4 Clarify. the. factors tending to inspire excessive risk-taking in the banking sector. In the answer, you might wish to reference the principles of the collateral multiplier as well as the convexity of pay-off to equity-holders, and to the returns structure inside the sector.
B5. Explain so why the bank sector is definitely subjected to the degree of control and government intervention than other sectors of the economy. Go over some current debates in banking legislation, with particular reference to the concept of asymmetric data.
B6. How have changes in the nature of banking in recent decades recently been reflected in the size and nature with their balance sheets? In...