Waec Model Questions Vol1 2021 Economics Question 8

Practice essay / theory question 8 from the 2021 Waec Model Questions Vol1 Economics examination. This question covers Money and Banking .

Waec Model Questions Vol1 2021 Economics Essay / Theory

Topic: Money and Banking

Question 8 WAEC_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • essay

The Central Bank of Country Y carries out an open‑market operation in which it sells government securities worth ₦200 billion to commercial banks. The statutory reserve ratio is 10 % and there are no excess reserves in the banking system at the time of the operation.

Question Parts

( a )

Explain the three primary functions of money and describe the principal role of the Central Bank in the monetary system.

( b )

Calculate the theoretical maximum reduction in the money supply that could result from the open‑market sale described above, using the appropriate money multiplier.

( c )

Discuss two practical limitations that may prevent the actual change in the money supply from reaching the theoretical maximum calculated in part (b).

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About This Question

This is Waec Model Questions Vol1 2021 Economics Question 8. It is one of the essay questions from the 2021 Waec Model Questions Vol1 Economics examination.

The question covers Money and Banking .

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