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MGT411 FINAL TERM Papers Spring Fall 2011
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Q:What are the limitations on "Restrospective Restatements" with respect to IAS-08?

Q:A customer of company ABC seems to be doubtful at ba;ance sheet date.therefore,comapny made the provision for the customer @ 5%.After the balance sheet date,customer paid 80% of the total amount.Required:Identify the type of event?What will be the accounting treatment of this event?

Q:What do you know about the cost of goods sold?

Q:What is the accounting treatment of surplus on revaluation of fixed assets with respect to the section 235 of the companies Ordinance 1984?

Q. What is the effect of a positive inflation shock on short run equilibrium? (5 mks)

Q2Suppose that over the past 20 years, the average annual return on interest rate
has been 12% for each dollar at the beginning of the period what if they had kept the investment for 10 years only? (5 mks)

Q3 What is meant by monetary policy? Differentiate between expansionary and contractry policy? (5 mks)

Q4 Responsible fiscal policy is essential for the success of monetary policy?
Discuss. (5 mks)


Q5 Under what conditions, inflation is persistent? (3 mks)

Q6 Discuss velocity in long run and short run? (3 mks)

Q7 Briefly define three types of security firms? (3 mks)

Q8 Define, “probability”? How does its value differ? (3 mks)

what is the difference between debit cards and credit cards? 5
what is the need of accounting and transparency in central bank? 3
aggregate demand is equals to consumption investment purchases exports. what element of AD is sensitive and what is not - sensitive? 5
why central bank lending to commercial bank? 3
monetary reserve curve and its location? 3
what is the effect on demand curve? 3


Question No: 43 ( Marks: 3 )
What is the source of Trading risk, Credit risk and Liquidity risk?

Question No: 44 ( Marks: 3 )
"Monetary policy can be used to stabilize economy".Discuss.

Question No: 45 ( Marks: 3 )
Give an account of different components of aggregate demand?

Question No: 46 ( Marks: 5 )
Differentiate between the Foreign exchange risk and the Sovereign risk.

Question No: 47 ( Marks: 5 )
Central bank can control the size of the monetary base. What are central bank monetary policy tools? Name them.

Question No: 48 ( Marks: 10 )
a) Central bank performs several functions. Describe how each tool of monetary policy is used in fulfilling each of those roles.

b) In 1992, the Bank of Canada eliminated the reserve requirement entirely. What do you think would happen if the State Bank of Pakistan followed the same course? Alternatively, suppose that following an act of Parliament, the State Bank of Pakistan started to pay interest on required reserves. Would the change have an impact on the market for reserves?

Question No: 49 ( Marks: 10 )
Explain how and why the components of aggregate demand depend on the real interest rate. Be sure to distinguish between the real and nominal interest rates, and explain why the distinction matters.

It is helpful to think of aggregate demand as having two parts, one that is sensitive to real
interest rate changes and one that is not
ƒ Investment is the most important of the components of aggregate demand that are sensitive to
changes in the real interest rate.
Output (Y)
Inflation (π)
Aggregate Demand Curve Money & Banking – MGT411 VU
© Copyright Virtual University of Pakistan 126
ƒ An investment can be profitable only if its internal rate of return exceeds the cost of borrowing
ƒ Consumption and net exports also respond to the real interest rate;
ƒ Consumption decisions often rely on borrowing, and the alternative to consumption is saving
(higher rates mean more saving).
ƒ As for net exports, when the real interest rate in a country rises, her financial assets become
attractive to foreigners, causing local currency to appreciate, which in turn means more imports
and fewer exports (lower net exports)
ƒ While changes in real interest rate may have an impact on the government’s budget by raising
the cost of borrowing, the effect is likely to be small and ignorable.
ƒ Thus, considering consumption, investment, and net exports, an increase in the real interest rate
reduces aggregate demand (the effect on the 4th component, government spending, is small

Real and Nominal Interest Rates
So far we have been computing the present value using nominal interest rates (i), or interest
rates expressed in current-dollar terms
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