1)Peter's mortgage loan was approved by Zambia National Building Society. Peter however, decided to purchase a model of a car called Bugatti using the mortgage. On the other hand, had initial plans of investing money in some risky online business. He therefore, approached a money lending institution and applied for a loan in the name of exporting goats to Democratic Republic of Congo and his loans was also approved for such a lucrative investment by the lending institution. As a student of Principles of Economics, discuss the above scenario and make relevant comparisons and distinctions. Referring to Asymmetric information.

2. Suppose that the economy initially has K700 in reserves.

If the required reserve ratios is 20%, what is the total money supply, assuming there is no cash being held? What is the money multiplier? What is the amount of loans outstanding in the banking system?

How much does the the money supply increase when the central bank adds $5.55 in new reserves?

If the central bank what's to make the money multiplier 10, what do they need to set the required reserve ratio to? If they make this change what happens to the money supply ?

If a bank in this economy has $200 of reserves, $250 of loans and $450 of deposits, how much excess reserves are they holding (use the required reserve ratio of 10%)? How much could the bank make in additional loans?

All the answers should be in Kwacha, take $1 = K18

3. Use a graphical approach to explain the effect of the following changes.

A new covid 19 face mask, made in America, is successful in sales to Zambia

Zambia reduces it's interest rate compared to the U.S., Causing investors to sell Zambian bonds and buy U.S. bonds.

Zambian's, unhappy with monetary unification, transfer their bank balances to the U.S.

pur-new-sol

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