Central Bank functions ; 3-tier banking system

1. A time deposit is better than a demand deposit in serving the __________functions of money because
time deposit______________
A.unit of account…..has a common unit
B.store of value….bears interest income.
C. medium of exchange…is generally acceptable
D. standard of deferred payments…is a liquid asset

2. In the financial system of HK, the Hong Kong Monetary Authority plays the role of
(1) operating the day-to-day business of the clearing house.
(2) stabilizing the exchange rate of the Hong Kong dollar.
(3) the lender of last resort.
A.(1) and (2) only
B.(1) and (3) only
C.(2) and (3) only.
D. (1), (2) and (3)

3. Which of the following is NOT a function of the Hong Kong Monetary Authority?
A. to stabilize the mortgage rate.
B. to issue currency notes
C. to supervise the commercial banks
D. to manage the Exchange Fund

4.Which of the following is/are the function(s) of the Hong Kong Monetary Authority?
(1) Managing the Exchange Fund
(2) Carrying out an independent monetary policy by increasing or decreasing HK’s money supply
(3) Determining Hong Kong's market interest rate
A. (1) only.
B. (2) only
C. (3) only
D. (1), (2) and (3)

5. Which of the following is NOT a function of the Hong Kong Monetary Authority?
A.. supervising the liquidity position of the private banking institutions
B. managing and investing the Exchange Fund
C. maintaining the stability of the linked exchange rate
D. determining the inter-bank offered rate in Hong Kong.

6 . Eason plans to open a current account (i.e. demand deposits) since she wants to write a cheque for
$100,000. Which of the following institutions should she go to?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A. (1) only.
B. (1) and (2) only
C. (2) and (3) only
D. (1) and (3) only

7. Catherine has $500,000 and wants to put the money in savings deposits. Which of the following
institutions should he go to?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A. (1) only.
B. (1) and (2) only
C. (2) and (3) only
D. (1), (2) and (3)

8. Angel plans to deposit $500 000 in a financial institution in Hong Kong for two months. Which of the
following institutions can accept this deposit? (1) licensed banks (2) restricted licence banks (3) deposit-
taking companies
A. (1) and (3) only
B. (2) and (3) only
C. (1) and (2) only.
D. (1), (2) and (3)

9.Tommy wants to deposit $300,000 for 6 months. Which of the following institutions can accept her
deposit?
(1) licensed banks
(2) restricted licence banks
(3) deposit-taking companies
A.(1) only
B.(1) and (3) only.
C.(2) and (3) only
D.(1), (2) and (3)

10. State FOUR central bank functions performed by the HKMA in Hong Kong. (4 marks)
ANSWER
First, being the government’s banker and adviser.
Second, managing HK’s official reserves. (Exchange Fund)
Third, being a lender of last resort.
Fourth, issuing $10 notes and coins.
Fifth, supervising banks and other deposit-taking institutions.
Lastly, maintaining the stability of the linked exchange rate system in HK.