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Banking
Certificate Course: Principles of Economics |
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| Objective To enable candidates to understand: - the basic principles of economics; - the economic and competitive environment in which banks operate; - the relationship between these two aspects of economic activity. |
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| SYLLABUS | |
| 1. | How
Prices of Commodities and Services are Determined Demand: influence of utility and price. Supply: influence of costs and price. Elasticity of supply and demand: cross, income and interest rate elasticity; changes in demand and supply - increases and decreases, extensions and contractions. Joint demand and joint supply. |
| 2. | How
the Price, Output and Profits of a Firm are Determined Perfect and imperfect competition; oligopoly and monopoly. Factors affecting the costs of the individual firm (or bank); internal and external economies and diseconomies; fixed costs. Specialisation: limiting factors. How and why firms become larger and smaller. |
| 3. |
How General Price Levels and National Output are Determined Inflation: how it is measured; how it arises; hyper-inflation; creeping inflation. The effects of inflation on an economy. National output (GDP): measurement; effects of changes in levels of consumption, investment and saving. Role of the banks in financing output and providing payment services for production and distribution. Unemployment: types, causes and ways of measurement. Remedies. |
| 4. | How
International Trade in Goods and Services is Developed and How International
Prices/Exchange Rates are Determined The theory of comparative advantage: its effect upon international trade in capital goods, fuel and raw materials, consumer goods and services. The foreign exchange market: demand for and supply of currencies; significance of interest rate differentials in determining exchange rates. The balance of trade; balance of payments; how imbalances can be financed and corrected. |
| 5. | How
Economic Theory Applies to the Financial Services Industry Role and functions of the Bank of Tanzania. The distinctions between a central bank, the commercial banks, the building societies and the investing financial intermediaries; bancassurance. A commercial bank: Main headings of its balance sheet and profit and loss account; main sources of deposits; asset structure; liquidity; profitability. Main costs - economies and diseconomies of scale; barriers to entry. |
| 6. | The
Quantity of Money and Interest Rates Money: definition; characteristics; functions. The demand for money and near-money. Interest rates: real and nominal; changes (movements) in interest rates; their effect on economies, exchange rates, banks and their customers. Money supply: why it changes; credit creation; fractional multipliers, the money supply identity; Tanzania monetary aggregates. |
| 7. | The
Effect of Government Policies on Banks and the Rest of the Economy Effects of government spending, taxation and borrowing; financing/funding of a positive/negative Public Sector Borrowing Requirement; effects of legislation and exhortation. Fiscal and monetary policy in Tanzania. Current policies and principles: their effects on the banks and their customers. The Exchange Rate Mechanism (ERM) and Economic and Monetary Union (EMU). The Bank of Tanzania role in implementing monetary policy. The prudential control of banks and other financial institutions; how these controls differ from monetary policy initiatives. |
THE
EXAMINATION |
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