Title

UNIVERSITY OF MAURITIUS

FACULTY OF SOCIAL STUDIES AND HUMANITIES

SECOND SEMESTER EXAMINATIONS

MAY 2007

PROGRAMME/LEVEL

PAPER TITLE

MODULE CODE

BSC (HONS) ECONOMICS LEVEL II & III

BSC (HONS) ECONOMICS WITH ACCOUNTING – LEVEL II

BSC (HONS) ECONOMICS WITH MANAGEMENT

LEVEL II

BSC (HONS) STATISTICS WITH ECONOMICS – LEVEL II & III

BSC (HONS) ECONOMICS AND FINANCE – LEVEL II

MONEY, BANKING AND FINANCE

ECON 2004Y(3)

DATE

TIME

DURATION

SATURDAY 26 MAY 2007

09.30 – 12.30 HRS

3 HOURS

INSTRUCTIONS TO CANDIDATES

NO. OF QUESTIONS SET

8 (EIGHT)

NO OF QUESTIONS TO BE ATTEMPTED

5 (FIVE)

TOTAL NUMBER OF PAGES : 5 ( INCLUDING COVER)

MONEY, BANKING AND FINANCE

[ECON2004Y(3)]

ANSWER FIVE(5) QUESTIONS AT LEAST TWO(2) FROM EACH SECTION.

SECTION A

1(a) Discuss Patinkin’s (1965) proof that in Walrasian general equilibrium model including the money market, there is an inconsistent and invalid classical dichotomy.

(15 marks)

(b) Explain Patinkin’s (1965) solution to make the model discussed in (a) above

determinate and consistent.

(10 marks)

2 (a) Evaluate the alternative theories of money demand.

(15 marks)

(b) Highlight the main empirical issues in estimating and formulating a money demand function for a developing economy like Mauritius.

(10 marks)

3. To what extent the alternative theories of interest rate determination can explain the level and behaviour of major interest rates in Mauritius?

(25 marks)

4. Write short notes on three of the following:

(a) Monetary union

(b) Central Bank independence

(c) Banking regulation

(d) Transmission mechanisms of monetary policy

1

(25 marks)

2

SECTION B

ANSWER AT LEAST TWO(2) QUESTION FROM EACH SECTION.

5 (a) Explain fully the Two Separation Theorem. Explain and state all necessary assumptions.

(6 marks)

(b) Given the two variables X and Y:

Probability of State of Nature

State of Nature

Variable X

Variable Y

0.2

0.2

0.2

0.2

0.2

I

II

III

IV

V

14

7

10

4

5

0

-2

12

6

4

(i)...