Use a game-theoretic analysis to demonstrate the importance of full deposit insurance for a retail bank (15 marks)
lb. How do the experiences of Northern Rock and HBOS in the financial crisis of 2007-2008 demonstrate the importance of the composition of a bank's assets and liabilities (1500 words)
6a. Assume the central bank in a closed economy sells treasury bills to a retail bank which responds by reducing its lending to the non-bank private sector. Use an elementary flow of funds analysis to show the effects of this action on the official sector, the banking sector and the non-bank private sector. (10 marks)
6b. Use an elementary flow of funds analysis to illustrate the effect of UK quantitative easing on the non-bank private sector, the banking sector and the official sector. (25 marks)
6c. When might quantitative easing be ineffective? (15 marks) (1500 Words)
Sample Solution