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6 marksMonetary Theory and Policy

CAPE Economics Unit 2 · 2008 · Paper 2 · Question 3(a)(ii)

Section II covers monetary and fiscal policy. Candidates answer one question.

State THREE functions of money.

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Other parts of this question

  1. 3(a)(i)Define 'money' in economic terms.[2 marks]
  2. 3(b)Describe FOUR tools used by the Central Bank to influence the supply of money.[16 marks]
  3. 3(c)(i)Explain what is meant by the 'money multiplier'.[4 marks]
  4. 3(c)(ii)Outline the first FOUR rounds in the process by which banks create money, assuming an initial deposit of $100 and a required reserve ratio of 10%.[12 marks]
  5. 3(d)(i)State the equation for the quantity theory of money.[2 marks]
  6. 3(d)(ii)State what EACH symbol in the quantity theory of money equation represents.[8 marks]

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