Theory question 108
Stock ExchangeCommerce 2 (essay)
(a) Explain four functions of the stock exchange
(b) Explain four ways by which the Central Bank regulates the activities of commercial banks.
Show the model answer
Model answer
(a) Any four, explained: market for buying and selling securities; helps raise long-term capital; publishes share prices; protects investors; encourages saving and investment; barometer of the economy.
(b) Any four, explained: bank rate; open market operations; cash/liquidity ratio; special deposits; selective credit control/directives; moral suasion.
Explanation
Each method in (b) should say how it raises or lowers bank lending.