Wl-2-60-1-6
lOMO KENYAlTA UNIVERSITY
OF
AGRICULTURE AND TECHNOLOGY
UNIVERSITY. EXAMINATIONS 2014/2015
YEAR III
SEMESTER I EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
HPS 2402:
MONEY AND BANKING
DATE:DECEMBER 2014
INSTRUCTIONS:
TIME: 2 HOURS
Answer question one and any other two questions.
QUESTION ONE
a.
Define the term monetary policy.
(2 marks)
b.
Explain five functions of money.
(10 marks)
c.
Differentiate between devaluation and depression of the currency.
(5 marks)
d.
Highlight six draw backs of the barter trade system.
(6 marks)
e.
Discuss the reasons why the Gold standard faired in most of the economies.
(7 marks)
QUESTION TWO
a.
If the money supply in a given economy equals 500 while the velocity and pure
equals 8 and 2 respectively.
Required
i.
Level of real output.
(4 marks)
ii.
Level of nominal output
(4 marks)
b.
Explain six functions of commercial banks operating in Kenya's financial system.
(12 marks)
QUESTION THREE
a.
Discuss four major objectives of the monetary policy in Kenya.
b.
Explain the limitations of fiscal policy employed by the Kenyan Government.
(8 marks)
(12 marks)
QUESTION FOUR
a.
Monetary standards refers to the characteristics which must be possessed by
money in order to carry out its functions.
For a material to be used as a monetary standard it must possess some
characteristics. Explain five characteristics of money material.
(10 marks)
b.
Paper money implies currently notes as well as any other representative money
that is in paper form.
Highlight five advantages of using paper money to make payments. (10 marks)
QUESTION FIVE
A county is said to have a gold standard when gold metal is the standard of value or
when gold is the basis for all currencies. Discuss giving examples where applicable the
type of gold standards.
(20 marks)