Question 1:
Which of the following would cause a growth in the money supply? Answer yes, no, or possibly. If your answer is 'possibly' then explain the circumstances under which the answer would be 'yes'.
(a) The selling of government securities to banks;;
(b) An increase in government expenditure, financed by borrowing from the banking sector;
(c) The purchase of government securities by the Central Bank from the banking sector;
(d) It is agreed by the Treasurer and the Governor of the Central Bank to reduce the target rate of inflation.
Question 2:
The following are the various elements within a nation's balance of payments account:
(i) Imports of goods (-)
(ii) Exports of goods (+)
(iii) Imports of services (-)
(iv) Exports of services (+)
(v) Other income outflows (-)
(vi) Other income inflows (+)
(vii) Capital transfers sent overseas from the nation (-)
(viii) Capital transfers to the nation from overseas (+)
(ix) The nation's investments overseas (-)
(x) Investment in the nation from overseas (+)
(xi) Short-term financial outflows (-)
(xii) Short-term financial inflows (+)
(xiii) Adding to reserves (-)
(xiv) Drawing on reserves (+)
Into which of the above categories would you put the following?
(a) DVD recorders imported into the nation from Japan;
(b) Insurance cover purchased in the nation by overseas residents;
(c) The nation gives overseas aid to a developing country;
(d) US car company sets up a factory in the nation;
(e) Some of the nation's residents take a holiday in Bali; Interest earned by the nation's residents on overseas assets;
(g) Running down the stock of foreign exchange in the Central Bank of the nation;
(h) Migrants to the nation transferring property to the nation;
(i) New deposits made in banks in the nation by overseas residents;
(j) The nation's palm oil is sold in the United Kingdom.