QUESTION
(a) Using the monetarists theory of money, show and explain how a change in money supply causes inflation. (10 marks)
(b) What role do non-financial institutions play in economic development? (10 marks)
QUESTION
(a) Explain the three motives of holding money as stipulated in the Keynesian theory. (12 marks)
(b) What are the primary features that a commodity should posses to serve efficiently as money? (8 marks)
QUESTION
(a) Distinguish between simple and complex money supply. (6 marks)
(b) Given that the minimum reserve requirement ratio of a nation equals 15% and the public desires to hold 25% of their wealth in money form, determine how much will be created by commercial banks system from an initial money deposit of 850 million shillings? Out of these money created, how much of it will be in cheques form? (8 marks)
(c) Explain the neutrality and super-neutrality of money. (6 marks)
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