(a) Explain just how an individual can source loanable funds for expenditure through financial markets and financial intermediaries. (b) Assume a shut down economy exactly where Y=C+I+G. wherever Y is usually national income, C is consumption, I is investment and G is govt expenditure. In the event that income (Y) = k8million, taxes=k1. a few million, private saving=k0. a few million, and public saving=k0. 2 , 000, 000 (i) Determine what countrywide savings, personal savings and public savings are. (ii) Calculate usage, government spending, national savings and purchase. (c) Specify what government budget shortfall is. Utilizing a clearly marked diagram, present and clarify how government budget deficit crowds away private purchase. (d) Describe how personal savings and purchase are important in fostering economic growth. QUESTION TWO
(a) If the central bank really wants to increase funds supply using open market operations, clarify what it must do. (b) Clarify the effect of an increase in the discount price by the central bank within the amount of reserves banks hold, the bucks multiplier and ultimately the money stock throughout the economy. (c) Imagine k500 can be deposited inside the bank. And banks have got a 10% reserve rate. (i) Establish what arrange ratio is definitely. Define and calculate the cash multiplier. (ii) Calculate how much cash will be made by the banking system from the k500. (iii) Assuming a reserve percentage of 5%, and 20%, Calculate the bucks multiplier and money made out of each book ratio. Use your measurements to explain the way the money multiplier and cash created alterations when the book ratio is definitely increased& reduced. (d) Utilizing a clearly and well branded diagram, present and make clear the effect of an increase in money supply within the inflation charge of the overall economy. QUESTION a few Explain how fiscal policy and budgetary policy may be used to get a great economy out of economic downturn.