Question No.1, Short Answers Devaluation means to bring down the exchange rate of currency officially. Forward Rates are related to future deliveries or transactions. Stagflation is a phenomena situation where the country economy faces unemployment along with a high rate of inflation.
Question No.2 Functions of Central Bank
Major Functions of Central Bank are as follows: Monopoly of note issue, Keeps the deposits of central and provincial governments, advances loans to the government, Custodian of cash reserves
Central bank acts as a clearing house for the purpose of settlement of daily mutual claims of other commercial banks. Central bank operates a the lender of last resold, in difficult times state banks give loads to the scheduled banks, also involved in the discounting of bills.
In any country, central bank is the leader of capital market, it works for the establishment and growth of the economy, it also makes policies and takes decisions to avoid undue expansion or contraction of credit and to stabilize the credit or monetary system.
Question No.3 Price Index Numbers, Uses There are several uses of index numbers: Measurement of value of money, Helpful to government and the people, useful to compare financial performance of current year with the previous years, computation of consumption index number for a particular section .
Limitations of Index Numbers Index Numbers suffers from several limitations: Less approximation, conceivable Goods, difficulty in comparison due to variable standards, Determinants of weights.
Question No.4 Objectives or Advantages of Nationalization Objectives of Nationalization includes provision of loans to all sectors of the economy, setup of executive board ty the government to look administrative work of the scheduled banks.
Question No.5 Functions of Commercial Banks in Pakistan Receving of deposits under various kinds of accounts: savings, fixed deposit and foreign currency accounts
Loans Issued By Banks includes Cash credit, Opening of Loan Account, Overdraft, Mortgage or pledge and through discounting of Bills. Commercial banks also performs some secondary functions such as acting as agent for their customers, collection of dividends.
Utility Services are also provided by Commercial Banks, Foreign exchange services to facilitate foreign trade and travel.
Question No.6 Difference Between Capital Market and Money Market Capital market deas in long term loans, while money markets operates with the objective of short term lending.
Question No.7 Money Money can be defined as a medium of exchange.
Primary Functions of money includes:
Medium of Exchange
Measure of value
Secondary Functions of Money:
Standard of Deferred Payment (Payment after a specific duration of time)
Store of Purchasing Power
Ability of transferring power
Market Mechanisms exists only due to money.
Contingent Functions of Money
Basis of credit
Distribution of Income
Balance of marginal productivity and Utility.
Increased utilization of capital.
Question No.8 Types of Sources of Business Finance
Question No.9 How Commercial Banks Employ Their Funds
Commercial banks advances loans, which are mainly divided into secured and unsecured loans, These loans further may be of following types: Demand loans, overdraft, Discounting of B/E, Cash Credit, Fixed loans. Banks also employs funds through direct investment in different opportunities.