Full-Time End of Module Assessment 2019/20 (Semester 1) Module Code Tick: BUS 300 Economics Course Code LeveYear: BAU BAU BAU BA B U BU R UN RAIMOOT, 220/01, RAIMO BL/240/21, RAINO . 4/200/61, 0762, 4120/82 RUNY, BAN240202424025/ 2 B 24006/1. BA1240277, B4/24027/2, BAI240782, 84124030 BU1240302. B4124031, BAINA. BAIN2. BA2209 (6 marks) Questions a) Anson Lam withdraws $3,000 cash from his savings account with a licensed bank and buys a negotiable certificate of deposit issued by a restricted licence bank. What are the possible changes in MI, M2 and M3? Briefly explain you answer b) A singer in Hong Kong performed a show and raised RMB SIO million for a charity organization in Guangzhou, China. The RMB S10 million donation was then remitted to Guangzhou and deposited into a local Chinese bank there. (i) (5 marks) Explain the process of how the deposit of RMB $10 million creates further deposit in the local banking system in regard to the case above. (3 marks) (ii) Assume that at the time of deposit, the minimum reserve ratio required by the Chinese monetary authority is 20% and the local banks keep no excess reserves. Calculate the maximum amount of total deposit being created Assume that Hong Kong is experiencing an economic downturn and the Hong Kong Monetary Authority (HKMA) considers to implement economic policy in order to stimulate the economy. (6 marks) Discuss whether fiscal policy or monetary policy is more suitable for Hong Kong Explain TWO reasons to support your argument (Total: 20 marks) Page 9 of 10

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