Mgt411 GDB No. 2 Solution
Saturday, January 15, 2011 Posted In MGT Edit ThisTotal Marks= 2
Starting Date Friday, January 14, 2011
Closing Date Tuesday, January 18, 2011
Status Open
Question/Description
Starting Date Friday, January 14, 2011
Closing Date Tuesday, January 18, 2011
Status Open
Question/Description
Banking sector plays vital role in the capitalist economies all over the world especially this role also gets significance in the developing countries like Pakistan. Policies of Central Bank, imposed on the commercial bank and financial sector, are considered as one of the key factors to boost the economy and control the inflation.
"If all commercial banks in Pakistan increase the small loans limit to Rs. 200,000 for general public at very low interest rate along with relaxed terms and conditions. Such loans will be used only for personal use and luxury items. What will be the effect of this activity of commercial banks on the money supply, inflation, Balance of payment (BOP) and real growth?"
You are required to answer/comments in the following table, which show only which component increases or decreases or both situations are possible"
Macro issue Increases / Decreases
/ May increase or decrease
Money supply ?
Inflation? ?
Balance of Payment (BOP) ?
Real Growth ?
............
Solutions:
Money supply = Increases
Inflation = Decreases
Balance of Payment (BOP) = Increases
Real Growth = Increases or Decreases
....................
1. Increase
2. Decreases
3. Increases
4. Increases or Decreases
..................
money supply Increase
inflation Decrease
Balance of payment (BOP) Increase
real growth may increase or decrease
.................
1-money supply Increase (CORRECT)
2-inflation Decrease (WRONG ) COZ WHEN MONEY SUPPLY EXCESS AVAILABLE IN MARKET THEN INFLATION WILL BE INCREASED SO (INCREASE)
3-Balance of payment (BOP) Increase (WRONG) BOP WILL BE MAY DECREASED OR INCREASE DUE TO EXCESS MONEY OF SUPPLY (MAY DECREASED OR INCREASED )
4-real growth may increase or decrease (WRONG) coz real growth will be decreased due to personal and luxury loans. (Decreased)
............
Solutions:
Money supply = Increases
Inflation = Decreases
Balance of Payment (BOP) = Increases
Real Growth = Increases or Decreases
....................
1. Increase
2. Decreases
3. Increases
4. Increases or Decreases
..................
money supply Increase
inflation Decrease
Balance of payment (BOP) Increase
real growth may increase or decrease
.................
1-money supply Increase (CORRECT)
2-inflation Decrease (WRONG ) COZ WHEN MONEY SUPPLY EXCESS AVAILABLE IN MARKET THEN INFLATION WILL BE INCREASED SO (INCREASE)
3-Balance of payment (BOP) Increase (WRONG) BOP WILL BE MAY DECREASED OR INCREASE DUE TO EXCESS MONEY OF SUPPLY (MAY DECREASED OR INCREASED )
4-real growth may increase or decrease (WRONG) coz real growth will be decreased due to personal and luxury loans. (Decreased)
