Eco. 002 (4-2-2022–Online Discussion/Quiz 2—Some Money and Banking Issues)

Anusionwu Otuodichukwumma Falicitas
Reg no. 2019/245869
Economics major
Monetarism
Monetarism is a macroeconomic theory which states that governments can foster economic stability by targeting the growth rate of the money supply. Essentially, it is a set of views based on the belief that the total amount of money in an economy is the primary determinant of economic growth.
Central to monetarism is the quantity theory of money, which states that the money supply (M) multiplied by the rate at which money is spent per year (V) equals the nominal expenditures (P * Q) in the economy.
Monetarism is closely associated with economist Milton Friedman, who argued that the government should keep the money supply fairly steady, expanding it slightly each year mainly to allow for the natural growth of the economy.
Monetarism is a branch of Keynesian economics that emphasizes the use of monetary policy over fiscal policy to manage aggregate demand, contrary to most Keynesians.
Although most modern economists reject the emphasis on money growth that monetarists purported in the past, some core tenets of the theory have become a mainstay in nonmonetarist analysis.
The monetarist theory is an economic concept that contends that changes in money supply are the most significant determinants of the rate of economic growth and the behavior of the business cycle. When monetarist theory works in practice, central banks, which control the levers of monetary policy, can exert much power over economic growth rates.
It is governed by the MV = PQ formula, in which M = money supply, V = velocity of money, P = price of goods, and Q = quantity of goods and services.
The Federal Reserve controls money in the United States and uses three main levers—the reserve ratio, discount rate, and open market operations—to increase or decrease money supply in an economy.
According to monetarist theory, if a nation’s supply of money increases, economic activity will increase and vice versa.
Monetarist theory is governed by a simple formula: MV = PQ, where M is the money supply, V is the velocity (number of times per year the average dollar is spent), P is the price of goods and services and Q is the quantity of goods and services. Assuming constant V, when M is increased, either P, Q, or both P and Q rises.
General price levels tend to rise more than the production of goods and services when the economy is closer to full employment. When there is slack in the economy, Q will increase at a faster rate than P under monetarist theory.
What Are the Differences Between Monetarist Theory and Keynesian Theory of Money?
Keynesian Theory of Money
At the core of the Keynesian Theory of Money is consumption, or aggregate demand in economic jargon. Keynesians believe that the key to both a healthy economy and correcting recessions and depressions is doing whatever it takes to entice consumers to continue spending.
Monetarist Theory
Second, we have Monetarist Theory, which was created by economist Milton Friedman, among others, as a criticism to what was seen as the shortcomings of the Keynesian Theory. The primary flaw, in Monetarist thinking, is the effectiveness of government spending to drive aggregate demand.

NAME: UGWU UKAMAKA MARYTHERES
REG NO: UNN/J21/Socs/010
COURSE: ECON 001
EMAIL: ugwuukamakamarytheres1@gmail.com

1. The existence of External diseconomies in production lead to over production which in turn led to market failure because a product or service’s price equilibrium does not accurately reflect the true costs and benefits of that product or service.
industrialists, solely concerned with their private profits, and dont always have any incentive to minimize the social cost of their actions. It led to a deadweight loss of social welfare. An example is a factory built in a residential complex, he examined the external cost that is imposed on those living in the complex in the form of air and noise pollution, congestion, etc.

2. Government intervention can promote social well being;
Promoting Social Welfare, in an unregulated inefficient market, cartels and other types of organizations can wield monopolistic power, raising entry costs and limiting the development of infrastructure. Without regulation, businesses can produce negative externalities without consequence. This all leads to diminished resources, stifled innovation, and minimized trade and its corresponding benefits. Government intervention through regulation can directly address these issues.
Another example of intervention to promote social welfare involves public goods. Certain depletable goods, like public parks, aren’t owned by an individual. This means that no price is assigned to the use of that good and everyone can use it. As a result, it is very easy for these assets to be depleted. Governments intervene to ensure those resources are not depleted.

Also Market failures can be solved through government intervention, such as imposing new laws or taxes, tariffs, subsidies, and trade restrictions. Because one of the main causes of market failure is when one participant has control of one or more areas of the market and therefore is able to control the price of a good or service rather than letting changes in supply and demand do so.

3. Government intervention is not desirable because without government intervention, firms can exploit monopoly power to pay low wages to workers and charge high prices to consumers. Without government intervention, we are liable to see the growth of monopoly power. Government intervention can regulate monopolies and promote competition.
Government intervention causes more problems than it solves. For example, state support of industries may encourage the survival of inefficient firms.

A) The higher the cash ratio and liquidity ratio the lower will be the level of bank deposit

B) The more the government borrow,the less the level of bank deposit may rise

C) The more cash is held by the general public,the lower the level of bank deposit will be

D)The more government debt is held by the general public,the lower the level of bank deposit will be.

2) A money market is a place of exchange for debt instruments with an original maturity of less than 1 year. WHILE A capital market is a place of exchange for debt instruments with an original maturity of more than 1 year.

3) Central banks
Commercial Banks
Non banking financial intermediaries
Acceptance houses

4) They settle their indebtedness through the clearing house.A clearing house is a voluntary association of banks under the management of a bank where the settlement account are maintained

5) A commercial bill is a short term negotiable,in case of goods sold on credit,the buyer is liable to make the payment on a specific date in future. WHILE A treasury bill is a short term government securities with maturities ranging from a few days to 52 weeks.

6) Bank creates new money whenever they make loans,They create money during their normal operation of accepting deposit. 97% of the money in the economy today exist as bank deposit, while just 3% is physical, only 3% of money is still in that old fashioned of cash that you can touch,in this example we will use (M1= currency in our pockets and balances in our checking accounts).

7) Banks keep only small amount of cash as cash reserves because they know that all depositor do not approach the bank for withdrawal of money at the same time and also they don’t withdraw the entire amount in one go
SECTION B

1) The fiduciary issue is a bank note issued by a central bank that is not backed by gold,the value of the issues relying entirely on the reputation of the issuing bank

2) It carries out banking business of the government,and the government keeps it cash balance on current account with the Central bank ,It acts as a financial advisor and agent to the government,it buys and sell securities on behalf of the government as an agent,it gives temporary loans to both Central and state governments,it manages the debt of the central government.

3) it is referred to as the lenders of the last resort because in any country,it central bank offers an extension of credit to financial institution experiencing financial difficulty that cannot obtain funds elsewhere.

4) it is an Independent national authority that conduct monetary policy and regulate banks

b)it provided financial services including economic research

c)it goals are to stabilize the nation’s currency and prevent inflation

d)They are lender’s of the last resort to the government

e) Custodian of cash reserves

5) Open market operations is an activity by a central bank to give or take liquidity in it’s currency to or from a bank or group of Banks. They sell and buy government securities by the central bank of a nation.To increase the money supply,the central bank buys back securities while to reduce the money supply it sells security to the commercial Banks.

6)a.. A special deposit is a deposit made of a particular thing with the depositary .it is distinguished from an irregular deposit.
b… The distinguished feature of a special deposit is that the identical money is to be kept apart from the general funds of the Bank so that it can be returned to the depositor or used for the specific purpose for which it was deposited.

Name:Amamchukwu Chiamaka Claire
Reg no: mgtsc/026
Section A
1=
The higher the cash and liquidity ratio the higher the level of bank deposits.
2=
a, A money market is a finicial market were short term borrowing can be issued while capital market is a finicial market were long-term borrowing can be issued
b, money market deals with documents like certificate deposits,treasury bills,commercial paper,while capital market deals with stocks, shares, and bonds.
c, the level of risk in money market is low, while in that of capital market is high
d, money market instruments enjoys higher degree of liquidity while capital market securities are called and considered liquid investment
e, investment in the money market requires huge sum of money while capital market requires little amount of money.
3=
The main institutions involved in the money market are the central bank, microfinance banks, acceptance houses, bureau de change, non banking finicial intermediaries,discount houses, primary mortgage institutions,community bank, finance company.
4=
Bank settles bank interdebtedness through,
Finance houses, acceptance houses, clearing house, money market, discount house, stock exchange.
5=
A commercial bill is a bill of exchange issued by a commercial organization to raise money for short term needs,while a treasury bills are government bonds or securities with maturity of less than a year
Treasury bills are issued by the government while commercial bills are issued by the private sectors or corporate organizations.
6=
Bank creates money out of accepting deposits and making loans
7=
Commercial banks keep only small amount of money reserve because so that they will never run short of money and in the case of any unexpected occurance of inflation.

Section B
1=
Fiduciary issue is an issue of a bank note not backed up by gold.
2=
Central bank as a banker to the government entails that the central bank gives loan and advances to the government for temporary periods.
3=
Central bank is the lender of last resort because it is the central bank that offers extension of credit to the government in the case of immediate finicial difficulties.
4=
Functions of central bank are that they are the, banker to the government
Lender of last resort
Custodians of international currency
Currency regulators.
5=
Open market operation is when the Federal Reserves buys and sells government securities to control the money supply and interest rates.
6=
A special deposit consists of placing speccific kinds of money to the bank or propertyin the posesion of the bank with an obligation of the bank to return the identical thing deposited and their purpose is to make interest and high value.

Section A

1. Which of the word in italicized letters is correct in the following statement?
(c) The more cash is held by the general public, the higher/lower the level of bank deposits will be.

2. Distinguish between the money market and capital market.
The money market is the trade in short-term debt. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year.
While
The capital market encompasses the trade in both stocks and bonds. These are long-term assets bought by financial institutions, professional brokers, and individual investors.

3.what is the main institutions involved in the money market.
Institutions that involve or operate in the market include A. The the Central Bank
B. commercial banks
C. discount houses.

4. How do banks settle inter-bank indebtedness
Commercial banks usually settle their interbank indebtedness through the following
A. money market
B. clearing house
C. discount house
D. stock exchange

5. What is the difference between a commercial bill and a treasury bill?
Commercial bills and Treasury bills are both short-term investments. The key differences between them stem from the fact that Treasury bills are issued by the federal government, while commercial bills come from the private sector.
Commercial bills, commonly referred to as “commercial paper,” are unsecured, short-term debt instruments that a corporation or other private organization uses to ensure it has adequate cash on hand to cover operating costs. Commercial bills are typically sold in denominations of $1 million and up. They usually have very short maturities, often maturing overnight, and are typically issued at market interest rates.
Treasury bills, also known as T-bills, are U.S. government debt securities with a maturity of less than a year. They are sold in denominations of $1,000 and up, usually with a maturity of one, three or six months. T-bills don’t come with an interest rate attached to them; instead, Treasury bills are sold through competitive bidding, and they pay face value at maturity. The holder’s return, therefore, is the difference between the price paid and the face value. Say you pay $995 for a $1,000 T-bill with a six-month maturity. At maturity, you receive $1,000. Your return is $5, or 0.5 percent of $1,000, in six months — the equivalent of a 1 percent annual return.

6. How do the banks create money?
Banks create new money whenever they make loans. 97% of the money in the economy today exists as bank deposits, whilst just 3% is physical cash. Only 3% of money is still in that old-fashioned form of cash that you can touch. Banks can create money through the accounting they use when they make loans. 

7. Why need the commercial banks keep only small amount of cash relative to their liabilities?
Bank reserves are the cash minimums that financial institutions must have on hand in order to meet central bank requirements. This is real paper money that must be kept by the bank in a vault on-site or held in its account at the central bank. Cash reserves requirements are intended to ensure that every bank can meet any large and unexpected demand for withdrawals.

Section B

1. What do you understand by the fiduciary issue?
The fiduciary issue is the part of the issue of notes and coins that is not backed by gold. In the past bank notes were issued and were backed by gold. You could always redeem your notes and have gold back in exchange. However, the system quickly developed so that the value of notes issued exceeded the amount of gold. 

2. The central bank acts as banker to government. What does this entail?
central bank is to act as governor of the machinery of credit in order to secure stability of prices. And these are the reasons:
1. The central bank is given the sole monopoly of issuing currency in order to secure control over volume of currency and credit.
2. Central bank functions as a banker to the government—both central and state governments. It carries out all banking business of the government. Government keeps their cash balances in the current account with the central bank.
3. There are usually hundreds of banks in a country. There should be some agency to regulate and supervise their proper functioning. This duty is discharged by the central bank.
4. Central bank controls credit and money supply through its monetary policy which consists of two parts—currency and credit. Central bank has monopoly of issuing notes (except one-rupee notes, one-rupee coins and the small coins issued by the government) and thereby can control the volume of currency.
5. Another duty of a central bank is to see that the external value of currency is maintained. 
6. When commercial banks have exhausted all resources to supplement their funds at times of liquidity crisis, they approach central bank as a last resort. 

3. What is meant when the central bank is referred to as the lender of the last resort?
A lender of last resort is whoever you turn to when you urgently need funds and you’ve exhausted all your other options. Banks typically turn to their lender of last resort when they cannot get the funding they need for their daily business. In situations like that, central banks act as the lender of last resort. 

4. What are the main functions of a central bank?
1. Currency regulator or bank of issue
2. Bank to the government
3. Custodian of Cash reserves
4. Custodian of International currency
5. Lender of last resort
6. Clearing house for transfer and settlement
7. Controller of credit
8. Protecting depositors interests
But in Nigeria the function are:
1. ensure monetary and price stability;
2. issue legal tender currency in Nigeria;
3. maintain external reserves to safeguard the international value of the legal tender currency;
4. promote a sound financial system in Nigeria; and
5. act as Banker and provide economic and financial advice to the Federal Government.

5. How do open-market operation work?
open market operations is the buying or selling of bonds and other securities to control the money supply. With these transactions, the Fed can expand or contract the amount of money in the banking system and drive short-term interest rates lower or higher, depending on the objectives of its monetary policy.

6. What are special deposits? What is their purpose?
Special deposit is a deposit made of a particular thing with the depositary: it is distinguished from an irregular deposit.When a thing has been specially deposited with a depositary, the title to it remains with the depositor, and if it should be lost, the loss will fall upon him.
The distinctive feature or purpose of a special deposit is that the identical money is to be kept apart from the general funds of the bank so that it can be returned to the depositor or used for the specific purpose for which it was deposited. 

Section A
1a.The higher the cash and liquidity ratio, the higher the bank deposit.This is because liquidity is the amount of money that is readily available for investment and spending. It consists of cash,treasury bills,notes and bonds that can be easily sold.Liquidity ratio is the proportion of the total asset of a bank which must be held in the form of liquid asset, so when the liquidity ratio is high the bank deposit will be high cause there will be credit creation.

b.The more the government borrow the less the bank deposit this is because the more the government borrow the cash in the bank won’t increase rather will decrease.

c.The more the cash is held by the general public the lower the level of bank deposit this is because credit creation of bank will be less.

d.the more government debt is held by the public the less the bank deposit cause money will be needed to clear the debt thereby not increasing credit creation.

2.The money market is the trade in short term.it is a constant flow of cash between government, corporate banks and financial institutions borrowing or lending money for short term
While Capital market encompasses the trade in both stock and bond.These are long term assets bought for financial institutions,professional brokers etc

3.The main institution of money market is commercial bank.

4.Bank settle indebtedness through clearing house.Clearing house acts as a medium between any two entities or parties that are engaged in a financial transaction.

5.The difference between the two is that treasury bills are issued by the federal government while commercial bills are issued by the private sector or coporate organisations.

6.Commercial banks creates money by giving out loan to individuals.Cause they generate money from the interest gotten from the loans.

Section B
1
2.The central bank acts as bankers to the government in a way that the government keeps an account for central bank. From those accounts expenditures are met and into them revenues are paid.
The central bank role in the management of government debt.The central bank acts as government agent in raising new loans, redeeming old ones and paying the interest on the national debt.It also lends to the government usually a very short term basis.it also an adviser to the government in financial matters.

3.Central bank is lender of last resort to the commercial bank because they are the only institutions that that give money to the commercial bank when they are running out of cash.
4.Functions of central bank:
a.issue of currency:The central bank is the sole authority for the issuance of currency(notes and coins).In Nigeria CBN issues all currency note.
b.Banker to the government:This is the oldest of the functions of central bank.The government keeps account at the central bank as do all government departments. From the accounts expenditure are met and into them revenue are paid.
c.Bankers bank:Commercial and other banks are known as bankers.They keep deposit with the central bank indeed their deposit with the central bank play a very important role in the centrals bank control over the commercial and other banks.
d.Management of monetary system:it manages the monetary system of the country along the lines set by government policy.
5.How open market operation (OMO)works:
This instrument involves the buying and selling of government securities in order to influence the commercial banks cash and liquid assets base.Whether these securities are bought from the commercial banks direct or from individual or firm the end result is exactly the same.OMO has been the most important weapon for liquidity manage in Nigeria since 30 June 1993.By selling securities the central bank forces commercial bank to restrict capital and by buying securities it forces them to increase credits.
6.Special deposits are simply certain percentages of gross deposits which the banks are called upon to deposit with the central bank as part of the bank’s overall control over the monetary system.
b.Their purpose is that they earn for the banks a rate of interest approximately to the treasury bill rate.

SECTION A:
1a). Lower- because earnings can drop if liquidity ratio increases. An increase in cash deposit ratio leads to a decrease in money multiplier.
b). Higher- because if government borrowing increases the bank interest rate will also increase and the bank will benefit from it because the higher the borrowing the higher the interest rate will be, and the lower the borrowing the lower the interest rate will be.
c). Lower- because banks uses the reserve deposit of customers to issue out loans to others and if the general public holds more cash in hand rather than depositing them it will affect the bank.
d). Lower- because banks hold sovereign debt,this hurts banks balance sheets and threatens the solvency of the financial system. Because large-scale bank failures are very costly, this induces the government to bail out banks in order to prevent them from collapsing.
2a). Money market is a component of financial market where short-term borrowing can be issued. This market includes assets that deal with short-term borrowing, lending, buying and selling. They are known to have a low return but are considered safe.While, capital market is a component of a financial market that allows long-term trading of debt and equity-backed securities.e.g;stock and bonds.
If you need money within one year for a planned expense, such as a down payment on a house, keep it in the money market.
bi). Central bank
ii). Commercial banks
iii). Non-bank financial intermediaries
iv). Discount houses and bill brokers
v). Acceptance houses
c). Commercial Banks settle their daily inter-bank indebtedness through the money market, finance house, acceptance house and clearing house. As between the two financial institutions and their respective customers, they will typically settle by debiting and crediting their respective customer accounts they maintain.
d). A difference between them is that while Treasury bills are issued by the government, federal government of Nigeria, commercial papers are issued by the private sector or corporate Organizations. Commercial papers are usually unsecured much like Treasury bills,but Treasury bills come with the full faith of the federal government. Commercial bills and Treasury bills are both short-term investments.
e). Diversified banks make money in a variety of different ways; however, at the core,banks are considered lenders. Banks generally make money by borrowing money from depositors and compensating them with a certain interest rate. The banks will lend the money out to borrower’s, charging the borrower’s a higher interest rate, and profiting off the interest rate spread. Additionally, bank usually diversify their business mixes and generate money through alternative financial services including investment banking, and wealth management. However, broadly speaking,the money- generating business of banks can be broken down into the following:
1). Interest income
2). Capital markets income
3). Fee- based income.
f). The bank’s main liabilities are it’s capital (including cash reserves and,often, subordinated debt) and deposits. For example, Central banks make it mandatory for commercial banks to maintain bank reserves with them. Some Central banks set the minimum bank reserves, requiring banks to keep a particular Percentage of their customer deposits at the central bank. The reserves help to cushion banks against unexpected events like bank runs and bankruptcy.
SECTION B:
1). According to encyclo information the fiduciary issue is the part of the issue of notes and coins that is not backed by gold. You could always redeem your notes and have a gold back in exchange. But according to economics giving a little explanation on fiduciary issue state those banknotes issued by a central bank without backing in gold, the value of the issues relying entirely on the reputation of the issuing bank. The amount of high powered money issued by a central bank in excess of its holdings of gold reserves.
2). Central bank functions as a banker to the government, both central and state government. It carries out all banking business of the government. Government keeps their cash balances in the current account with the central bank. Similarly, central bank accepts receipts and makes payment on behalf of the governments.
3). Central bank is lender of last resort. Whenever banks are short of funds, they can take loans from the central bank and get their trade bills discounted. The central bank is a source of great strength to the banking system. When commercial banks have exhausted all resources to supplement their funds at times of liquidity crisis, they approach central bank as a last resort.
4). Central banks carry out a nation’s monetary policy and control its money supply. Often mandated with maintaining low inflation and steady GDP growth. On a macro basis, central banks influence interest rates and participate in open market operations to control the cost of borrowing and lending throughout an economy.
5). The Federal Reserve buys and sells government securities to control the money supply and interest rates. This activity is called open market operations……To increase the money supply, the fed will purchase bonds from banks; which injects money into the banking system. It will sell bonds to reduce the money supply.
6). Special deposit is an instrument of monetary policy involving the placement of a specified proportion of the banking sectors liquid assets with the central bank as a means of controlling the money supply. Special deposits are excluded from the banker’s liquidity or reserve-asset ratio.
6ii). The distinctive feature of a special deposit is that the identical money is to be kept apart from the general funds of the bank so that it can be resumed to the depositor or used for the specific purpose for which it was deposited.

1. C
2. The money market is the trade in short-term debt. It is a constant flow of cash between governments corporations, Banks and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year. While the capital marketina encompasses the trade in both stocks and bonds.
3. Institutions that operate in the market include the central bank, commercial Banks, and discount houses.The major short-term institutions associated with the Nigeria money market include treasury securities, commercial papers call money, bankers unit fund, bankers’Acceptances e.t.c
4. The commercial Banks settle the inter bank indeopttness through the dearing house, the cleaning house is an intermediary between buyers and seller financial institutions.
5. A difference between them is that while treasury bill are issued by the government, federal governmen
t of Nigeria, commercial papers are issued by the private sector or corporate organizations. Commercial papers are usually unsecured much like treasury bills, but TBs come with the full faith of the federal government.
6. Bank create new money whenever they make loans. Banks can create money through the accounting they use when they make loans.
7. They keep small money relative to their liabilities in order to maintain liquid and to facilitate lending while also maintaining health balance sheet.

Section B
1. A fiduciary is a person or organization that acts or another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust.
2. The central bank operates as the government bankers, not only because it is more convenient and economical to the government, but also because of the intimate connection between public finance monetary affairs.
3. It is responsible for providing it’s nation’s economy with funds when commercial bank cannot cover a supply shortage.
4. Central bank carry out a nation’s monetary policy and control.its money supply, often mandated with maintaining low inflation and steady GDP growth.
5. The federal reserve buys and sells government securities to control the money supply and internet rates. this activity is called open market operations.To increase the money supply, the fed will purchase bounds from banks, which injects money into the banking system.
6. The distinctive feature of a special deposit is that the identical money is to kept apart from the general funds of the bank so that it can be returned to the depositor or use for the specific purpose for which it was deposited.

Reg no:unn/j21/Arts/011
Section A
(1b)Government borrowing is directly instrumental in reducing the money supply in the market.
(2)A money market is a component of financial market where short-term borrowing can be issue while as a capital market is a component of a financial market that allows long-term trading of debt and equity-backed securities.
(3)Institution # 2. Central Bank:
Institution # 3. Acceptance Houses:
Institution # 4. Non-banking Financial Intermediaries:
Institution # 5. Bill Brokers:
(4)commercial banks usually settle their inter bank indebtedness through the
(A)money market
(B)clearing house
(C)discount house
(D)stock exchange
(5)commercial bill are unsecured short term debt issued by a corporation,often times for the financing of short-term liabilities and inventory while a treasury bill is a short term obligation issued by the u.s treasury are backed by the u.s government with a maturity of less than one.
(6)Banks create new money whenever they make loans.
(7)Bank have little incentive to maintain excess reserves because cash earns no return and even lose value over time due to inflation.
Section B
(1)The fiduciary issue is the past of the issue of notes and coins that is not backed by gold.
(2)The central bank act as a banker to the federal government undertakes most of federal government banks businesses within and outside the country.
(3)A lender of lost resort is an institution,usually a country’s central bank,that offers loans to banks or other eligible institutions that are experiencing financial dificulty or are considered highly risky or near courage.
(4i)The central bank carries out a nation’s monetary policy.
(ii)central bank control a nation’s money supply.
(iii)The CBN is often mandated with maintaining low inflation and steady Gdp growth.
(iv)The CBN influence the interest rates and participate in often market operations to the cost of borrowing the lending throughout an economy.
(5)open market operations involve the buying and selling of government securities. Open market operations are flexible and thus,the most frequently used tool of monetary policy.
(6)A special deposit is a deposit made of a particular thing with the depositary.
(6i)The purpose of the scheme was to provide better returns to non government provident funds.

Princess Raymond.unn/j21/ARTS/078
princcessraymond03@gmail.com
1).The higher the cash liquidity ratio the higher the level of bank demand .
2). money market is a component of financial market where short term borrowing can be issued . That market includes assets that deals with short term borrowing, lending, buying and selling.
While
Capital market is a component of a financial market that allows long term trading of debt and equity backed securities.
3). commercial bank and central bank.
4). commercial bank settle the inter-bank indebtness through the clearing house, the clearing house is an intermediary between buyers and sellers of financial instrument.it is an agency or separate corporation of a future exchange responsible for setting trading account, clearing trade, collecting and maintaining margin monies, regulating delivery of asset to their new owners and reporting trading data.
5). Treasury bills are issued by the government, federal government of Nigeria.
While
Commercial Bill are issued by the private sector or cooperate organizations.it is usually unsecured much like Treasury bills TBS come with the full faith of the federal government.
6). commercial bank make money by providing and earning interest from loan such as mortgage, auto loans, business loan, and personal loans, customer deposit provides bank with the capital to make this loan.
7). They keep small money relative to their liabilities in order to maintain liquid and to facilitate lending while also maintaining healthy balance sheet.
Section B
1). Fiduciary issue is the part of the issue of note and coins that is not backed by gold.
2). The central bank operates as the government bankers, not only because it is more convenient and economical to the government,but also because of the intimate connection between public finance monetary affairs. It keeps the banking account and balances of the government after making disbursement and remittance.
3). central bank is the lender of last resort because, in any country, it’s central bank that offer an extension of credit to financial institution experiencing financial difficulty that can not obtain necessary fund else where.
4a). Currency regulator or bank of issue: The central bank has the exclusive rights to manufacture note in economy.
4b).Bank of the government:They act as bank of the government by accepting deposit and issuing funds to the government,they also involve in making and receiving payment for the government.
4c). Custodian of international currency:The main minimum balance of foreign currency. The purpose of maintaining such balance is to manage sudden or emergency requirements of foreign reserve and also to over come and adverse deficits of balance of payment.
4d). Custodian of cash reserve:it is a practice of the commercial of a country to keep a part of their cash balance in form of deposit with the central bank. The commercial bank can draw that Balance when the requirements for cash is high and may back the same when there is less requirements for cash.
4e). Lender of last resort: The central bank act as a lender of last resort by providing money for the commercial bank in time to perform this function by providing loans against securities, Treasury bills and also by discounting bills.
5). Open market operations work: The buying and selling of bonds and other security to control the supply with these transaction, the FED can expand or contract the amount of money in the banking system and drive short term interest rate lower or higher, depending on the objective of it’s monetary policy.
6). special deposit is that identical money to be kept apart from the general funds of the bank so that it can be kept apart from the general funds of the bank so that it can be returned to the depositor or used for the specific purpose for which it was deposited.
6b).The purpose of special deposit is to provide better returns to non government provident fund, superannuation and gratuity funds, surplus funds of the life insurance corporation (LIC).The special deposit are entrusted to the bank not to be used,but to be kept sefely and specifically returned.

A) less
B) more
C) less
D) less

Money market is the trade in short-term debt. It is a constant flow of cash between government,corporations,banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year. While the capital market encompasses the trade in both stocks and bonds. These are long-term assets bought by financial institutions, professional brokers,and individual investors.

(3) the institutions are; commercial bank, central bank, acceptance houses, non-banking financial intermediaries, and bill brokers.

Commercial bank are the back bone of the money market. They form one of the major constituents of the money market.

Central bank plays a vital role in the money market. It is the monetary authority and is regarded as an apex institution.

Acceptance houses and Bill brokers are the main institutions dealing in the bill market. The institution of acceptance houses developed in England where merchant bankers transferred their headquarters to London money market in the late 19th and the early 20th century.

4)through central bank cause the commercial banks borrow money from them.

Commercial bill are unsecured, short-term debt issued by a corporation, often times for the financing of short-term liabilities and inventory. Meanwhile treasury bill is normally issued by the central bank of a country, which assists the government to borrow money from the money market on short-term basis.

(6) Banks can create money through the accounting they use when they make loans.

(7) commercial banks keep small amount money in bank in other to prevent the panic that can arise if customers discovers that a bank doesn’t have enough cash on hand to meet immediate demands.

(8) The fiduciary issue is the part of the issue of notes and coins that is not backed by gold. In the past bank notes were issued and were backed by gold.

(9) Central bank is an agent and banker to the government. It controls public account . Receives revenue on behalf of the government and makes payment from this account. Central bank also obtain loans on behalf of the government.

(10) The central bank has a duty to assist the banking system when the banks are in financial difficulties so that they can withstand the strain of excessive demands.

Functions of central bank
1. Banker to the government
2. Issuance and control of currency
3. Responsible for monetary policy
4. Lender of last resort
5. Management of national debt.
6.

Open Market Operation (OMO) when there is too much in circulation. The central bank will sell securities. But in order to expand the volume , it buys securities.

Special Deposit is that the identical money is to be kept apart from the general funds of the bank so that it can be returned to the depositor or used for the specific purpose for which it was deposited.

UNN/J21/MGTSCS/020
Onyima John Chinedu

Nedjohn17@gmail.com

NAME:ONYENEKE SANDRA CHIZARAM
REG NO:UNN/J21/ARTS/003
COURSE:ECO 002
ASSIGNMENT ON ECONOMICS
1)Which of the word in italicized letters is correct in the following statement?
a)The more cash is held by the general public, the higher/lower the level of bank deposits will be.
2)Distinguish between the money market and capital market.
a) MONEY MARKET:Money market is defined as a market for short-term financial assets that can be turned over quickly at a low cost.this markets includes assets that deals with short-term borrowing,lending,buying and selling.
b) CAPITAL MARKET: Capital market are defined as a financial market for the buying and selling of long term debt or equity backed securities.capital market main aim Is to raise long term funds for governments,bank and corporation while providing a platform for the trading of securities.
3)what is the main institutions involved in the money market.
a)The central bank
b) Commerical banks
c) Discount houses
4)How do banks settle inter-bank indebtedness
The banks settle inter-bank indebtedness through clearing house.
5)What is the difference between a commercial bill and a treasury bill?.
a) Commerical bills: commercial bills are unsecured,short-term debt issued by a corporation, commerical bill is a bill of exchange used to finance the credit sales of firm,it is a short term, negotiable and self liquidity instrument
b)Treasury bill’s: Treasury bill’s are short-term sovereign debt securities maturing in one year or less.treasury bill’s are issue to meet short term mismatches in receipts and expenditure,bond of longer maturity are called dated securities.
6)How do the banks create money?
a)Banks create money during their normal operations of accepting deposit and making loans.
b)Banks create money out of asset.
7)Why need the commercial banks keep only small amount of cash relative to their liabilities?
Bank have little incentive to maintain excess reserves because cash earns no return and even lose value over time due to inflation.thus banks normally minimize their excess reserve ,lending out the money to clients rather than holding it in their vaults.
SECTION B
1)What do you understand by the fiduciary issue?
The fiduciary issue is the part of issue of note and coins that is not backed by gold
However the notes can be redeem and the gold backed in exchange.
2)The central bank acts as banker to
government. What does this entail?
This means that the central banks operates as the government’s banker not only because it is more convenient and economical to the government but also because of the intimate connection between public finance,monetary affairs.the also act as an agent to the government where general exchange control is in force.as a banker to the government, reserve bank receives and pays money on behalf of the various government department and also undertake to float loans and manage them on behalf of the government.
3)What is meant when the central bank is referred to as the lender of the last resort?
Central Bank is the lender of last resort because in any country,it’s central bank offers an extension of credit to financial institutions experiencing financial difficulty that cannot obtain necessary fund elsewhere.
4)What are the main functions of a central bank?
a) central bank is an independent national authority that conducts momentary policy
b) it regulates banks
c) provide financial services including economic research.
d) custodian of foreign balance.
e) custodian of cash reserves
f) lender of last resort
g) banker, agent and advisor to the government
h) controller of credit.
5)How do open-market operation work?
The federal reserve buys and sell government securities to control the money supply and interest rates, federal reserve will purchase bonds from which injects money into the banking system,it will sell bonds to reduce the money supply.buying and selling of securities can influence market condition
6)What are special deposits?
A special deposit consists in the placing of specific kinds of money or property in the possession of the bank with an obligation of the bank to return the identical thing deposited.
6b)What is their purpose?
The distinctive feature of a special deposit is that the identical money is to be kept apart from the general funds of the bank so that it can be returned to the depositor or used for the specific purpose for which it was deposited

Section A
(1 )the correct answer is ( c)
(2) A money market is a component of financial market where short term borrowing can be issued•
Capital market is a component of financial market that allows long term trading of debt and equity backed securities•
(3) institution that operate in the market include , the central bank, commerce and discount houses •
(4) Banks settle their interbank indebeness through money market , clearing House, discount houses and stock exchange•
(5) commercial bills are unsecured debt issued by a cooperation•
Treasury bill is debt backed by the use of government with a maturity of under one year•
(6) Bank create money whenever they make loans•
Section (B)
(1) Fuduciary issue is the over loans having in the market •
(3)A central bank is a public institution that manage the currency of the country or groups of countries•

Section A

Which of the word in italicized letters is correct in the following statement?

a) The higher the cash and liquidity ratio, the higher/lower will be the level of bank deposits.
Ans. Higher.
(b) The more the government borrows, the more/less the level of bank deposits may rise.
Ans.more.
c) The more cash is held by the general public, the higher/lower the level of bank deposits will be.
Ans. Lower
d) The more government debt is held by the general public, the higher/lower the level of bank deposit will be.
Ans. Lower.
2. Distinguish between the money market and capital market.
Ans.The money market is the trade in short tern dept, it is constant flow of cash between government, corporation, bank and financial institution, borrowing and lending for a term as short as overnight and no longer than a year.while capital market encompasses the trade in both stocks and bonds.
3.what is the main institutions involved in the money market.
Ans. The main institution involved in money market is the central bank.
4. How do banks settle inter-bank indebtedness
Ans. Banks settle inter bank indebtedness through clearing house.
5. What is the difference between a commercial bill and a treasury bill?.
Ans. The difference between them is that treasury bills are issued by the government while commercial bills are issued by the private sector or corporate organisation.
6. How do the banks create money?
Ans. The bank create money during their normal operation of accepting deposit and making loans.
7. Why need the commercial banks keep only small amount of cash relative to their liabilities?
Ans. The commercial bank is mandated to keep only small amout of cash because it ensures that banks are able to meet their obligations.

Section B

1. What do you understand by the fiduciary issue?
Ans. Fiduciary issue is the part of the issue of note and coin’s that is not backed by golds.
2. The central bank acts as banker to government. What does this entail?
Ans. The cental bank act as the banker to the government because it carries out banking business of the government and the government keep its cash balance on current account with the central bank. It issues loans and advances to the government and does buying and selling of security onbehalf of the government.
3. What is meant when the central bank is referred to as the lender of the last resort?
Ans. Because it protect individuals who have deposited funds and to prevent customers from withdrawing out of panic from bank.
4. What are the main functions of a central bank?
Ans. The main functions of central bank is to carryout a nations monetery policy and control its money supply.
5. How do open-market operation work?
Ans. They buys and sell government securities to control the money supply and interest rates.
6. What are special deposits? What is their purpose?
Ans. Special deposit is a deposit made of a particular thing with the depositary and the perpose is to provide better return to non_government provident funds, superanuation and graduity funds.

SECTION A

1) ANSWER A

2) A money market is a component of financial market where short-term borrowing can be issued.while a capital market is a component of financial market that allows long term trading of debt and equity-backed securities.

3) The main institutions involved in the money market is the central bank and it plays a vital role in the money market. it is being regarded as an apex institution.

4) The banks settle inter-bank indebtedness through the bank clearing house and the clearing system is used among banks to settle cheques drawn on them.

5) Commercial bills are unsecured, short-term debt issued by a corporation, often times for the financing of short-term liabilities and inventory. While a treasury bills is issued by the central bank of a country, which assists the government to borrow money from the money market in short-term basis.

6) The banks create money by granting loans to members of the public and charging interest on them. By so doing more money is pumped into circulation and this increases the purchasing power of the people.

7) The commercial banks keep Small amount of cash relative to their liabilities because they are required to keep this amount of cash in case of liquidity and also to maintain a portion of their demand and time liabilities as cash reserves with the reserve bank. this is called bank reserve.

SECTION B

1) The fiduciary issue is an issued bank note not backed by gold but by government securities.

2) The central bank acts as banker to the government, this means that it controls public account, receives revenue on behalf of the government and makes payment from this account.

3) It is referred to as lender of last resort because the central bank has the duty to assist the banking system when the banks are in financial difficulties so that they can withstand the strain of excessive demands.

4) The main functions of central bank are :
I) Banker to the government: this means that it controls public account, receives revenue on behalf of the government and makes payment from this account.

Ii) Lender of last resort: this means that the central bank has the duty to assist the banking system when the banks are in financial difficulties so that they can withstand the strain of excessive demands.

III) Issuance and control of currency: the central bank has the right to order the printing of the currency and the issuance of it.

IV) Bankers bank: the central bank provide facility for other banks especially commercial bank to keep their reserve and clear their balance in the clearing house.

V) promotion of monetary stability: the central bank controls money supply in the economy to promote price stability.

5) The Open Market Operation (OMO) works by the purchase or sale of government securities in the open market to expand or restrict the volume of money in circulation.

6) Special deposits is when the central bank order the commercial banks to have special deposit, usually a percentage of the banks, deposit, to be made with it. It is also an instrument of monetary policy which is used to restrict lending.

NAME: UGWU UKAMAKA MARYTHERES
REG NO: UNN/J21/Socs/010
EMAIL: ugwuukamakamarytheres1@gmail.com

SECTION A
1. (a) Lower
(b) More
(c) Lower
(d) Higher

2. (i). The money market is the trade in short-term debt. While
The capital market encompasses the trade in both stocks and bonds. These are long-term assets bought by financial institutions, professional brokers, and individual investors.
(ii). A “money” market is places of exchange for debt instruments with an original maturity of less than one year. A “capital” market is places of exchange for debt instruments with an original maturity of more than one year and also the market for equity securities.

3. The institutions involved in money market are;
(i) Central Bank
(ii) Acceptance Houses
(iii) Non-banking Financial Intermediaries
(iv) Bill Brokers

4. Banks settle their interbank indebtedness through a clearing house which is a bankers’ establishment where cheques and bills from member banks are exchanged, so that only the balances need be paid in cash.

5. Commercial bills are unsecured short-term debt which is issued by a corporation, often times for the financing of short-term liabilities and inventory. While, a Treasury bill is short-term debt backed by the U.S. government with a maturity of under one year.

6. Banks create new money whenever they make loans. 97% of the money in the economy today exists as bank deposits, whilst just 3% is physical cash. Only 3% of money is still in that old-fashioned form of cash that you can touch. Banks can create money through the accounting they use when they make loans.

7. Commercial banks need small amount of money to ensure that it is able to meet liabilities in case of sudden withdrawals by customers.

SECTION B
1. The fiduciary issue is the part of the issue of notes and coins that is not backed by gold. In the past bank notes were issued and were backed by gold. You could always redeem your notes and have gold back in exchange.

2. The Central bank functions were mainly to act as the government’s agency for the control and supervision of the banking sector, to monitor the balance of payments according to the demands of the federal government and to tailor monetary policy along the demands of the federal budget.

3. Banks typically turn to their lender of last resort when they cannot get the funding they need for their daily business. Central banks have traditionally held this role because they are primarily the ones responsible for ensuring that financial markets function smoothly and the financial system is stable.

4. The functions of central bank are;
-Currency regulator or bank of issue.
-Bank to the government.
-Custodian of Cash reserves.
-Custodian of International currency.
-Lender of last resort.
-Clearing house for transfer and settlement.
-Controller of credit.
-Protecting depositors interests.

5. Open market operation is a situation where the Federal Reserve buys and sells government securities to control the money supply and interest rates. To increase the money supply, the Federal government will purchase bonds from banks, which injects money into the banking system. It will sell bonds to reduce the money supply.

6. A special deposit consists in the placing of specific kinds of money or property in the possession of the bank, with an obligation of the bank to return the identical thing deposited; the depositor retaining title.
Purpose:
The purpose of special deposit is that the identical money is to be kept apart from the general funds of the bank so that it can be returned to the depositor or used for the specific purpose for which it was deposited.