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Questions on Profile Three - Pt
I
Yvonne
Harvey, Contributor
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| Members
of the Lacovia High Schools' Challenge
Quiz Team at TVJ on Monday, February
13. - Ricardo Makyn Photo |
HI.
NOW it's time to begin looking at questions
related to Profile Three Finance
and Introduction to Economics. Please
be reminded that although the questions
being considered are past CXC questions,
the discussions and guideline answers
are those of the writer of the POB lessons
and not those of the CXC.
I
sincerely hope you got a chance to
look at the question for today. It
is taken from CXC past paper, January
2001, General, question 8. It reads
as follows:
The
Caribbean island of Green Mountain
is having problems with its financial
institutions. Customers of some banks
are adding to the problems as many
have withdrawn their deposits from
the banks. The government has asked
the central bank to do all it can
to prevent a collapse of the commercial
banking sector.
(a)
State FOUR characteristics of money.
(4 marks)
(b)
List TWO functions or services offered
by commercial banks. (2 marks)
(c)
For EACH of the functions mentioned
above, explain what benefit customers
obtain from using these functions.
(4
marks)
(d)
List FOUR features of central banks.
(4
marks)
(e)
Select THREE of the features of central
banks you mentioned above, and explain
how they help to promote smooth operation
of the banking system in your country.
(6
marks)
Total
marks: 20
DISCUSSION
AND GUIDELINE ANSWER
(a)
You must be careful not to confuse
the characteristics of money with
the functions of money.
The
characteristics of money are the features
of money. Money should be:
-
Generally acceptable
-
Durable or long-lasting
-
Homogeneous
-
Divisible into large and small units
- Scarce
or limited in supply
-
Portable
Any
FOUR characteristics may be stated.
(b)
The functions or services offered
by commercial banks today are many
and varied. They include the following:
Accept deposits from customers for
safekeeping and makes these deposits
available to customers when needed.
Lend money to qualified customers
at interest.
Allow standing order payments at customers'
requests.
Make the use of the cheque as a means
of payment possible.
Sell travellers' cheques and buy and
sell foreign currency.
Give financial advice to customers.
Help customers to open letters of
credit.
Act as agents in collecting dividends
on behalf of their customers.
Act as executors and trustees to the
written wills of their customers.
Allow customers use of the banks'
safety deposit boxes and night safe
facilities etc.
Any
TWO functions or services may be listed.
(c)
Whichever TWO functions you choose
to explain, you must ensure that you
properly explain the benefits of them
to the customer. For example:
The
function of accepting deposits from
customers benefits the customers in
that it allows them to keep their
money in a safe place instead of keeping
it at home. In addition, for most
deposit accounts, the customer earns
interest on his deposits and this
encourages him to save with commercial
banks.
Commercial
banks lend money to qualified customers
by opening loan accounts, by means
of overdrafts and by discounting bills
of exchange. Whatever the method,
customers are granted loans and benefit
from large sums of money, which they
perhaps could not save for, while
they benefit in being able to pay
back loans in small installments.
Customers benefit in getting loans
for various purposes including education,
vacation and for purchasing cars and
other assets.
(d)
The features of the central bank includes:
Carrying out government's monetary
policies.
Control and monitoring of commercial
banks and other financial institutions.
Issuing notes and coins and recalling
them from circulation when necessary.
Being banker to commercial banks and
to the government.
Negotiating on behalf of the government
in international financial agreements,
e.g. with the IMF, etc.
Any
FOUR features may be listed.
(e)
Again, in explaining the THREE chosen
features, you must be careful to show
how they promote smooth operations
of the banking system. For example,
in monitoring the commercial banks
and other financial institutions,
the central bank ensures that governments'
monetary policies are carried out
and that they are not promoting the
opposite policy which would cause
chaos in the financial system and
in the country. You must explain THREE
features in like manner.
Next
week's question will be based on international
trade and balance of payments. Ensure
that you revise these areas so that
you may get maximum benefit from the
discussions and guideline answers
presented.
Take
care until next week.
*
Yvonne Harvey teaches at Glenmuir
High School.
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