MULUNGUSHI UNIVERSITY
DEPARTMENT OF ECONOMICS
SEC 312 – Money and Banking Assignment Two
Instructions: The Assignment must be typed and to my email markchindumba@yahoo.com
Save the Document with your Name and Student ID number. Send both a pdf and a word document
to my email. The Documents will be subjected to AI and Plagiarism check. The score for
plagiarism should be below 20% together with AI Score.
The Test should have a Cover page, Table contents, Main body (3 Pages) and References. Font
type: Times New Roman Numerals, Font Size: 12 and Line Spacing: 1.5.
The Assignment is due on Friday 25th May, 2025 23:59hrs. No late Submissions!
Question One (36 Marks)
a) Explain the process of multiple deposit creation in the banking system. Using numerical
examples, illustrate how commercial banks create money through the deposit expansion
process. Evaluate the assumptions behind this model and discuss its limitations in realworld banking. (16 marks)
b) Define the different measures of money supply (M0, M1, M2, and M3), and explain how
they reflect the liquidity of money in an economy. Using real or hypothetical examples,
evaluate the importance of monitoring money supply aggregates in the formulation of
monetary policy. (20 marks)