Post Utme Bsu 2017 Commerce Question 16

Practice objective / multiple choice question 16 from the 2017 Post Utme Bsu Commerce examination.

Post Utme Bsu 2017 Commerce Objective / Multiple Choice
Question 16 POST_UTME_BSU • 2017 • COMMERCE • objective

The Central Bank of Nigeria (CBN) uses monetary policy to control inflation by increasing the reserve requirement for commercial banks. This action will likely lead to a decrease in the money supply, causing a decrease in the price level. However, if the CBN also increases the discount rate, it will increase the cost of borrowing for commercial banks, which may lead to a decrease in the money supply. Which of the following is a correct statement about the effect of the CBN's actions on the money supply?

Answer Options

Correct Answer A. The money supply will decrease due to the increase in the reserve requirement.
B. The money supply will increase due to the decrease in the discount rate.
C. The money supply will remain unchanged due to the offsetting effects of the two policies.
D. The money supply will increase due to the increase in the discount rate.
Correct Answer
A
Correct Option:
The money supply will decrease due to the increase in the reserve requirement.

About This Question

This is Post Utme Bsu 2017 Commerce Question 16. It is one of the objective questions from the 2017 Post Utme Bsu Commerce examination.

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