Waec Model Questions Vol1 2020 Economics Question 8

Practice essay / theory question 8 from the 2020 Waec Model Questions Vol1 Economics examination. This question covers Money and Banking .

Waec Model Questions Vol1 2020 Economics Essay / Theory

Topic: Money and Banking

Question 8 WAEC_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • essay

In March 2023 the Central Bank of Nigeria (CBN) announced two monetary‑policy actions: (i) a reduction of the statutory reserve‑requirement ratio (RRR) from 10 % to 8 %; and (ii) an open‑market purchase of government securities worth ₦5 trillion. Assume the economy is operating under the simple money‑multiplier framework and that the marginal propensity to consume is unchanged.

Question Parts

( a )

Calculate the theoretical money multiplier before and after the change in the reserve‑requirement ratio.

( b )

Using the new multiplier, estimate the maximum possible increase in the money supply that could result from the open‑market purchase.

( c )

Explain how the two actions are expected to affect interest rates, investment and inflation in the short run. Mention any potential offsetting factors.

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About This Question

This is Waec Model Questions Vol1 2020 Economics Question 8. It is one of the essay questions from the 2020 Waec Model Questions Vol1 Economics examination.

The question covers Money and Banking .

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