1. BANK Z (@ 10% RR) ASSETS LIABILITIES RR: K200,000 Deposits : K2,000,000 ER : K1,800,000 You are given the above Balance sheet for Bank Z as at 28th August, 2009. Answer the following questions; Assets: RR-K200,000;ER K1,800,000 Liabilities: Deposits: K2,000,000

i) Show how the Balance Sheet for Bank Z would look like after it loans out its Money to Mr. Chansa.

ii) Suppose Mr. Chansa Deposit his Money into Bank-B, How would the T- Balance sheet look like for Bank- B?

iii) If Mr. Mwanza approaches Bank- B for a loan, how much would he receive?

iv) After receiving a loan, Mr. Mwanza deposits his money into Bank-

C. Show how its Balance Sheet would look like after receiving deposits.

2. You are given a classical (labour theory of value) world with two countries, Zambia and Tanzania involved in the production of maize and cloth. Oil output (Barrels/labour-hour) Cloth output (Yards/labour-hour) Zambia 6 4 Tanzania 1 3 Answer the following questions:

a. State the commodity in which each country has absolute advantage.

b. Identify the commodity of comparative advantage for each country. Justify your answer

c. Indicate the gains to Zambia and Tanzania if the two countries exchanged 6 barrels of oil for 6 yards of cloth.

d. After the two countries specialize in their commodities of comparative advantage, show how the two countries total production will change.

e. What is the opportunity cost of producing cloth in Zambia?