1. Consumption function, C= 500+0.7 (Y-T); where, Y=4500 Tk and T=500 Tk and G=400 Tk

(a) Calculate disposable income, private, public and national savings?

(b) Investment function I (r) = 1200 - 40r, find out the equilibrium real interest rate?

2.

(a) State quantity theory of money? Mention two core assumptions behind the theory?

(b) Relate quantity theory of money with fisher equation?

(c) If inflation is 7% and nominal interest rate is 5%. What is the real interest rate? What

does it implies?

3. Graphically show with appropriate labelling:

What will happen if an amendment of law allows businesses to get fund from financial

sector more easily? (Note: Savings deposit is dependent on market interest rate)

4. Drawing the graph discuss the transmission mechanism of a contractionary fiscal policy in

terms government spending on savings where savings is independent of market interest

rate?

5. Write down the general money demand function and its properties?

6. There is excess supply of money; creating monetary inflation. If central bank wants to

control the flow of money supply - explain what instruments it can use?

7. If time deposit in an economy is 200 million taka. What is the difference between broad and

narrow money supply in the economy? Why government rely more on bond/national

savings certificate for long-term public financing over bank borrowing?

8. From the video that was given earlier, kindly answer the following questions:

What is seigniorage? Why Zimbabwe had to go for seigniorage? What was the consequence

of that? [Hint: At least write down the key words].