1. Critically evaluate whether it is possible/advisable to have two central banks in one country.

Support your answer with a thorough explanation, using the concepts learnt in the course. (1 point)

2. Analyze the moral hazard problem that the Central Bank faces in its role as the lender of last resort. (1 point)
3. Evaluate the potential impact of the UAE Central Bank setting a target of a zero inflation rate for the upcoming Year 2021. Determine the potential affected parties (e.g., people, banks, government institutions, businesses etc.) and discuss whether you predict this would lead to positive or negative outcome(s). Support your answer with a thorough explanation, using the concepts learnt in the course. (1 point)

4. Lets imagine things were different (perhaps, more optimistic), and COVID-19 never happened. Suppose Year 2020 was a lucky year for the UAE citizens and residents. They have recently received a note from their employers saying:

Congratulations! We have increased your salary by 10% starting from March 2020.

• Determine whether this would have any impact on the TRANSACTIONAL demand for money.

If not, why not? If yes, how? Support your answer with a thorough explanation, using the concepts learnt in the course. (1 point)

• Assess whether this would have any impact on the PORTFOLIO demand for money.

If not, why not? If yes, how? Support your answer with a thorough explanation, using the concepts learnt in the course.