Question
UNIVERSITY COLLEGE LONDON
EXAMINATION FOR INTERNAL STUDENTS
:
ECON7003
:
ECON7003A
MODULE NAME
:
Money and Banking
DATE
:
30-Apr-12
TIME
:
14:30
TIME ALLOWED
:
2 Hours 0 Minutes
MODULE CODE
ASSESSMENT
PATTERN
2011/12-ECON7003A-001-EXAM-310
©2011 University College London
TURN OVER
ECON7003. MONEY AND BANKING. Exam, Summer 2012.
TIME ALLOWANCE: 2 HOURS
The exam is in two parts.
Part A accounts for 30 marks.
Part B accounts for 70 marks.
Answer BOTH questions in Part A.
Answer TWO questions from Part B.
In cases where a student answers more questions than requested by the examination rubric, the policy of the Economics Department is that the student's first set of answers up to the required number will be the ones that count (not the best answers). All remaining answers will be ignored.
PART A.
Answer BOTH questions in this Part, which accounts for 30 marks.
Al. Use Phillips Curves and the Central Bank's indifference curves to illustrate diagrammatically the disinflation strategy of:
(a) a central bank which has an absolute aversion to inflation;
(b) a strongly inflation-averse (`hawkish') central bank;
(c) a strongly unemployment-averse (`dovish') central bank.
Specify the advantages of the above framework over the simple ISLM framework with respect to:
(a) the central bank's preferences;
(b) the supply side of the economy;
(c) the representation of the medium run.
17 Marks
A2. We have a situation in which the non-bank public has a cash-to-deposits ratio of
25%, and banks have a required reserves ratio of 3%. Bank A has an excess reserves ratio of 0.03%.
(a) What is the money multiplier faced by Bank A under these circumstances?
(b) Using numerical examples, discuss the likely effects on this multiplier of the following circumstances (assuming ceteris paribus in each case):
(i) The bank expands its operations in the field of financial derivatives;
(ii)
EXAMINATION FOR INTERNAL STUDENTS
:
ECON7003
:
ECON7003A
MODULE NAME
:
Money and Banking
DATE
:
30-Apr-12
TIME
:
14:30
TIME ALLOWED
:
2 Hours 0 Minutes
MODULE CODE
ASSESSMENT
PATTERN
2011/12-ECON7003A-001-EXAM-310
©2011 University College London
TURN OVER
ECON7003. MONEY AND BANKING. Exam, Summer 2012.
TIME ALLOWANCE: 2 HOURS
The exam is in two parts.
Part A accounts for 30 marks.
Part B accounts for 70 marks.
Answer BOTH questions in Part A.
Answer TWO questions from Part B.
In cases where a student answers more questions than requested by the examination rubric, the policy of the Economics Department is that the student's first set of answers up to the required number will be the ones that count (not the best answers). All remaining answers will be ignored.
PART A.
Answer BOTH questions in this Part, which accounts for 30 marks.
Al. Use Phillips Curves and the Central Bank's indifference curves to illustrate diagrammatically the disinflation strategy of:
(a) a central bank which has an absolute aversion to inflation;
(b) a strongly inflation-averse (`hawkish') central bank;
(c) a strongly unemployment-averse (`dovish') central bank.
Specify the advantages of the above framework over the simple ISLM framework with respect to:
(a) the central bank's preferences;
(b) the supply side of the economy;
(c) the representation of the medium run.
17 Marks
A2. We have a situation in which the non-bank public has a cash-to-deposits ratio of
25%, and banks have a required reserves ratio of 3%. Bank A has an excess reserves ratio of 0.03%.
(a) What is the money multiplier faced by Bank A under these circumstances?
(b) Using numerical examples, discuss the likely effects on this multiplier of the following circumstances (assuming ceteris paribus in each case):
(i) The bank expands its operations in the field of financial derivatives;
(ii)