Exercises

What is money?

What defines a good money?

What are the functions of money?

What is monetary base?

What are the two forms of money demand?

What is required reserve ratio?

What is credit creation?

State the Quantity Theory of Money.

What are the functions of central banks?

Which institution acts as the central bank of Hong Kong?

What is Hong Kong Interbank Offered Rate (HIBOR)?

What are the differences between M1, M2 and M3?

What are the differences between asset demand for money and transaction demand for money?

Describe the credit creation process.

Which central bank functions do HKMA serve?

State the formula for the maximum banking multiplier.

What is the maximum banking multiplier when the required reserve ratio of an economy is 20%?

What is the maximum banking multiplier when the required reserve ratio of an economy is 50%?

In a banking system, there are $400 reserves and no excess reserves. Also, there are $2000 deposits. What is the required reserved ratio?

In a banking system, there are $100 reserves and no excess reserves. Also, there are $1000 deposits. What is the required reserved ratio?

In a banking system, there are $1000 reserves, of which $600 is excess reserves. Also, there are $2000 deposits. What is the maximum banking multiplier?

In a banking system, there are $1300 reserves, of which $500 is excess reserves. Also, there are $2000 deposits. What is the maximum banking multiplier?

Suppose the public holds $300 cash and the monetary base is $500. The required reserve ratio is 20%. If all the banks are fully loaned up, what will be the amount of deposits?

Suppose the public holds $500 cash and the monetary base is $1000. The required reserve ratio is 25%. If all the banks are fully loaned up, what will be the amount of deposits?

Mr Wong withdraws $500 000 in cash from a deposit-taking company. He then deposits $300 000 with a bank as a time deposit and remits the remaining $200 000 overseas for the settlement of debts. What are the effects on M1, M2 and M3?

Initially, a banking system has a reserve of $400, of which $160 are excess reserves. Also, there are $1200 deposits and the public holds $200 cash. Suppose $100 is withdrawn from the banking system and held as cash by the public. What will the money supply be if the banks lend out all excess reserves?

“Cryptocurrency is a good money.” Evaluate this statement.

Digital renminbi is a central bank digital currency issued by China’s central bank. From money and banking’s perspective, what are the advantages of using digital currency over physical banknotes?