IGNOU ECO 09 Free Solved Assignment 2022-23, IGNOU ECO 09 Money, Banking and Financial Institutions Free Solved Assignment 2022-23 If you are interested in pursuing a course in radio production and direction, IGNOU ECO 09 can be an excellent choice. In this article, we will take a closer look at what IGNOU ECO 09 is all about and what you can expect to learn from this course.

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IGNOU ECO 09 Free Solved Assignment 2022-23 is a course offered by the Indira Gandhi National Open University (IGNOU) under the School of Journalism and New Media Studies. As the name suggests, it is a course on “Production and Direction for Radio.” The course is designed to provide students with a comprehensive understanding of radio production and direction and covers various topics related to this field. IGNOU ECO 09 Free Solved Assignment 2022-23

IGNOU ECO 09 Free Solved Assignment 2022-23

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Q1. Discuss the various motives for holding money. Is demand for money a function of the level of income and the rate of interest?

Money is held for various motives such as transactions, precautionary, speculative, and precautionary motives. Let’s discuss each of these motives in detail:

Transactions Motive: The transactions motive for holding money arises from the need to carry out day-to-day transactions. Individuals hold money to pay for goods and services or to meet their daily expenses. The demand for money for the transactions motive depends on the level of income and the level of prices. As income and prices increase, the demand for money for transactions also increases.

Precautionary Motive: The precautionary motive for holding money arises from the need to meet unexpected expenses or emergencies. Individuals hold money as a precautionary measure to cover unforeseen contingencies such as medical emergencies, job loss, or unexpected repairs. The demand for money for the precautionary motive depends on the level of income and the degree of uncertainty regarding future events. As income and uncertainty increase, the demand for money for precautionary purposes also increases.

Speculative Motive: The speculative motive for holding money arises from the desire to take advantage of investment opportunities that may arise in the future. Individuals hold money as a speculative measure to take advantage of attractive investment opportunities, such as buying stocks or bonds at lower prices. The demand for money for the speculative motive depends on the expected return on investment and the level of risk associated with the investment. As expected returns increase, the demand for money for speculative purposes also increases.

Precautionary Motive: The precautionary motive for holding money arises from the need to meet unexpected expenses or emergencies. Individuals hold money as a precautionary measure to cover unforeseen contingencies such as medical emergencies, job loss, or unexpected repairs. The demand for money for the precautionary motive depends on the level of income and the degree of uncertainty regarding future events. As income and uncertainty increase, the demand for money for precautionary purposes also increases.

The demand for money is a function of the level of income and the rate of interest. As income increases, the demand for money for transactions and precautionary purposes increases. As the rate of interest increases, the demand for money for speculative purposes decreases, as individuals may prefer to invest their money in higher-yielding assets rather than holding it in the form of money. However, the relationship between the demand for money and the rate of interest is not linear, and it may vary depending on the specific circumstances and the individual’s preferences.

Q2. What purposes arc being served by the International Monetary Fund and the World Bank and its affiliates?

The International Monetary Fund (IMF) and the World Bank Group (WBG) are two global financial institutions that were established to promote international economic cooperation and development.

The IMF was created in 1944 to ensure the stability of the international monetary system and to promote international trade by providing short-term loans to countries experiencing balance of payment difficulties. The IMF also provides policy advice and technical assistance to member countries in areas such as fiscal and monetary policies, financial sector reform, and exchange rate management.

The World Bank Group, on the other hand, was established in 1945 to help countries achieve their development goals by providing long-term loans, grants, and technical assistance for development projects. The World Bank Group consists of five institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

The IBRD provides loans to middle-income and creditworthy low-income countries for infrastructure and other development projects, while the IDA provides interest-free loans and grants to the world’s poorest countries. The IFC provides financing for private sector projects in developing countries, while MIGA helps promote foreign investment by providing insurance against political risk. The ICSID provides an impartial forum for resolving disputes between foreign investors and host countries.

Overall, the IMF and the World Bank Group play a crucial role in promoting global economic growth and stability by providing financial resources, policy advice, and technical assistance to member countries.

Q3. Explain clearly the main source of agricultural credit in India. How far the nationalised banks have been able to meet the credit needs of the farmers?

The main sources of agricultural credit in India are:

• Commercial Banks: Commercial banks provide short-term, medium-term, and long-term credit to farmers. They also offer loans for buying agricultural machinery, construction of farmhouses, and other purposes related to agriculture.
• Cooperative Credit Institutions: Cooperative credit institutions include primary agricultural credit societies, district central cooperative banks, and state cooperative banks. These institutions were set up to provide credit to farmers at low-interest rates.
• Regional Rural Banks: Regional rural banks (RRBs) were established to provide credit to the rural sector, including agriculture. They are jointly owned by the central government, state government, and commercial banks.
• Microfinance Institutions: Microfinance institutions (MFIs) provide small loans to farmers and rural households for various purposes, including agriculture. They operate in areas where traditional banks are not present or have limited presence.

Nationalized banks have been able to meet the credit needs of farmers to a significant extent. They have been instrumental in expanding the reach of institutional credit to the rural sector, including agriculture. The government has also taken various measures to ensure that farmers have access to credit, such as setting targets for banks to lend to the agricultural sector, providing interest rate subsidies, and setting up specialized institutions such as NABARD (National Bank for Agriculture and Rural Development).

However, there are still challenges in the agricultural credit sector in India, such as low credit absorption capacity, inadequate infrastructure, lack of awareness among farmers about credit products, and a high rate of non-performing assets (NPAs) in some banks. The government and financial institutions need to address these challenges to ensure that farmers have access to timely and adequate credit at reasonable rates.

Q4. What is credit creation? Explain how banks can create credit. What are the limitations of credit creation?

Credit creation refers to the process by which commercial banks create credit or money. Banks create credit by issuing loans or making investments that are backed by assets or collateral.

When a bank issues a loan, it creates a new deposit in the borrower’s account, which in turn creates new money in the economy. The bank creates credit by simply entering numbers into the borrower’s account, and these numbers are considered to be money that the borrower can use to make purchases or pay off debts.

The process of credit creation starts when a borrower approaches a bank for a loan. The bank assesses the creditworthiness of the borrower and the purpose of the loan, and if satisfied, it approves the loan and creates a new deposit in the borrower’s account. The borrower can use this deposit to make purchases or pay off debts.

Banks can also create credit by making investments. For example, a bank can invest in a company by buying its shares, and if the value of the shares goes up, the bank can sell them at a profit. The profit generated by the investment is then used to create credit.

However, there are limitations to credit creation. The amount of credit that a bank can create is limited by the reserve requirement imposed by the central bank. The reserve requirement is the percentage of deposits that a bank is required to keep in reserve, and it varies from country to country. The reserve requirement limits the amount of money that a bank can lend, and thus limits the amount of credit that it can create.

Another limitation of credit creation is the creditworthiness of the borrowers. Banks are reluctant to lend money to borrowers who have a poor credit history or who are not creditworthy, as they are more likely to default on their loans. This limits the amount of credit that banks can create.

Lastly, credit creation is also limited by the demand for credit. If there is a lack of demand for credit, banks will not be able to create credit, even if they have the capacity to do so.

Q5. Write short notes on the following:

(a) Milton Friedman’s Quantity Theory of Money

Milton Friedman’s Quantity Theory of Money is an economic theory that states that there is a direct relationship between the amount of money in circulation and the level of prices in an economy. According to this theory, the total amount of money in an economy, also known as the money supply, has a significant impact on the purchasing power of consumers.

Friedman believed that the primary determinant of inflation or deflation is the growth rate of the money supply. He argued that if the money supply increases faster than the growth rate of the economy, it will lead to inflation, and if the money supply grows slower than the growth rate of the economy, it will result in deflation.

The Quantity Theory of Money is expressed in a simple equation: MV = PQ, where M represents the money supply, V represents the velocity of money (i.e., the rate at which money changes hands in an economy), P represents the price level of goods and services, and Q represents the real output of goods and services produced in an economy.

Friedman believed that changes in the money supply would ultimately affect prices and that central banks should focus on controlling the money supply to maintain price stability. He advocated for a monetary policy that would control the growth of the money supply and maintain a stable level of inflation over time.

Overall, the Quantity Theory of Money has had a significant influence on modern economic thinking and has been used to guide monetary policy decisions in many countries. However, it remains a topic of debate among economists, and its applicability in different economic contexts has been questioned.

(b) Nationalization of Commercial Banks

Nationalization of commercial banks refers to the process by which a government takes control of privately owned banks and transforms them into state-owned enterprises. This can be done through a variety of methods, such as purchasing a controlling stake in the banks, passing legislation to transfer ownership, or forcing banks to merge with state-owned institutions.

The reasons for nationalizing commercial banks can vary, but often include concerns about financial stability, government control over the banking sector, and the desire to use the banks as instruments for economic policy. Nationalization can also be seen as a way to protect depositors and prevent financial crises.

In some cases, nationalization of commercial banks has been successful in achieving its intended goals. For example, in India, the nationalization of banks in 1969 and 1980 helped increase financial inclusion and stability, while also allowing the government to direct credit towards certain priority sectors of the economy.

However, there are also drawbacks to nationalizing commercial banks. Critics argue that government ownership can lead to inefficiencies, politicization of lending decisions, and a lack of innovation and competition in the banking sector. Additionally, the process of nationalization can be costly and can have negative impacts on the value of privately held shares.

Ultimately, whether nationalizing commercial banks is beneficial or not depends on the specific context and goals of the government. It is a complex and controversial issue that requires careful consideration of the potential benefits and drawbacks.

(c) Control of Credit

Unit Trust of India (UTI) was a financial institution in India that was created in 1963 as a government-owned entity to promote savings and investment. It was one of the largest mutual funds in the country, with a vast portfolio of stocks, bonds, and other securities.

UTI was known for launching India’s first mutual fund scheme, Unit Scheme 1964 (US-64), which was highly popular among investors. Over time, UTI launched several other mutual fund schemes, including Equity Funds, Balanced Funds, Income Funds, and Tax-Saving Funds.

In 2003, UTI was restructured into two separate entities – UTI Mutual Fund and UTI Asset Management Company (AMC). UTI Mutual Fund is now one of the largest mutual fund companies in India, with a wide range of investment options for retail and institutional investors.

In summary, UTI was a significant financial institution in India that played a crucial role in promoting savings and investment. Its legacy continues through UTI Mutual Fund, which remains a popular choice for investors in India.

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