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With the continuous advancements taking place in the information technology (IT) sector, could
these advancements cause financial intermediation to become extinct? Discuss.
Using the knowledge acquired
in the course (Money and Banking), explain how the Government through the central Bank (Fed) can reduce the inflation rate. (Explain the tools and the transmission mechanisms)
Explain the role of asymmetric information in financial markets. How does the existence of asymmetric information explain the importance of banks in financial markets?
John is contemplating on whether to go for a project that will give 100,000 each year for four years or a project that will give 75000 each year for six years. Advise him if the discount rate is 10%
Give two reasons why a central bank (Fed) does not have complete control over the level of bank deposits and loans. Explain how a change in either factor affects the deposit expansion
process.
As a financial manager of a large firm, you plan to borrow $100 million over the next year.
i). Mention 2 most likely ways in which you can borrow $100 million?
ii). How do individuals indirectly provide the financing for your firm when they maintain deposits at depository institutions.
Should managers estimate intrinsic values or leave that to outside security analysts? Explain
5. In a particular industry, labor supply is L
S = 10+W and labor demand is L
D = 40−4W,
where L is the level of employment and W is the hourly wage.
(a) What are the equilibrium wage and employment if the labor market is competitive?
What is the unemployment rate? [7]
(b) Suppose the government sets a minimum hourly wage of M8.
(i) How many workers would lose their jobs? [4]
(ii) How many additional workers would want a job at the minimum wage? [2]
(iii) What is the unemployment rate? [2]
(c) Suppose the hourly wage is M10 and the price of each unit of capital is M25. The
price of output is constant at M50 per unit. The production function is
f(L, K) = L
1/2K1/2
so that the marginal product of labor is
MPL = (1/2)(K/L)
1/2
If the current capital stock is fixed at 1,600 units, how much labor should the firm
employ in the short run? How much profit will the firm earn?
Consider an individual with M5000 of annual nonlabour income. She has total available
time (T) of 80 hours per week, for 52 × 80 = 54160 hours per year. Her current wage
rate is M15.00 per hour, and she currently chooses to work 2000 hours in a year.
(a) Draw a labour-leisure diagram, carefully illustrating her current labour supply
decision. [10]
(b) The wage rate rises to M18.00 per hour, and she decides to work 2040 hours.
At M18.00 per hour, if she worked 2200 hours per year, she would have been
indifferent to her original work decision (in part (a)). Show her new choice on
a diagram, and calculate the income and substitution effects associated with the
wage change. Calculate the compensated and uncompensated elasticities of labour
supply implied by her response to the wage increase.
Explain with the aid of a diagram the effect on the price of cocoa on an increase in the demand for beverages
