Scribd
Upload
32 views2 pages

Macroeconomics Tutorial: Money & Inflation

This document is a tutorial sheet for an Introduction to Macroeconomics course at Mulungushi University, covering various topics related to money, inflation, and fiscal policy. It includes questions on the functions of money, liquidity preference, components of money supply, and the impact of inflation on monetary policy. Additionally, it presents practical exercises involving calculations of monetary assets and discusses strategies to control different types of inflation.

Uploaded by

wilfredmukonde1905
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
32 views2 pages

Macroeconomics Tutorial: Money & Inflation

This document is a tutorial sheet for an Introduction to Macroeconomics course at Mulungushi University, covering various topics related to money, inflation, and fiscal policy. It includes questions on the functions of money, liquidity preference, components of money supply, and the impact of inflation on monetary policy. Additionally, it presents practical exercises involving calculations of monetary assets and discusses strategies to control different types of inflation.

Uploaded by

wilfredmukonde1905
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

MULUNGUSHI UNIVERSITY

DEPARTMENT OF ECONOMICS
INTRODUCTION TO MACROECONOMICS
SSE 122
TUTORIAL SHEET 3

1. What is Money? What are its Functions?


2. What qualifies a commodity to be considered as money?
3. Explain the three motives of liquidity preference as postulated by John Maynard Keynes?
4. Explain how inflation affects the functions of money.
5. State and explain the three components of money supply.
6. Suppose the Zambia has the following monetary asset information as of May 2023:
Cash in hands of the public = K300b (where ‘b’ represents billion)
Demand Deposits (DD) = K400b
Other Checkable Deposits = K150b
Traveler’s checks = K50b
Savings Type accounts = K2000b
Money Market Mutual Funds (MMMF) = K1000b
Small Time Deposits = K500b
Large Time Deposits = K450b
(a) Calculate M1 for Zambia.
(b) Calculate M2 for Zambia.
(d) Which item is not included in the calculations of M1 and M2?
7. Suppose a bank with a minimum cash reserve ratio of 10% receives K1,000 deposits.
How will this affect the balance sheet of the bank?
8. In the case of high inflation, the Government through the central bank can use monetary
policy to control inflation. Briefly discuss the mechanism by which monetary policy can
help cure inflation.
9. Explain what is meant by cost post inflation, its causes as well as measures that can be
taken to control Cost push inflation.
10. Explain what is meant by Demand Pull inflation, its causes as well as measures that can
be taken to control Demand Pull inflation.
11. Explain the Quantity theory of Money.
12. Suppose that in an economy, 600 loaves of bread are sold every year worth K20 each.
Further assume that the quantity of money is K100.
a) Find the total value of transactions and the Velocity of money.
b) Suppose Bank of Zambia were to increase the Quantity of Money to K150. Find the
new price level and the rate of inflation.
13. What is fiscal policy? How does the government use its fiscal policy instruments to
achieve the macroeconomic objective of reducing unemployment?
14. How can you curb inflation using fiscal policy?

You might also like