Gce Model Questions Vol1 2019 Economics Question 28

Practice objective / multiple choice question 28 from the 2019 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2019 Economics Objective / Multiple Choice Medium Difficulty
Question 28 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

Initially the required reserve ratio is 5 % and banks hold excess reserves equal to 2 % of deposits. The total amount of deposits in the banking system is ₦200 billion. The central bank then raises the required reserve ratio to 8 % while the excess‑reserve ratio remains unchanged.\ (a) Calculate the original money multiplier.\ (b) Calculate the new money multiplier after the change.\ (c) By what percentage does the money supply change as a result of the change in the reserve ratio?

Answer Options

Correct Answer A. (a) 14.29 (approx); (b) 10; (c) -30 %
B. (a) 15.0 (approx); (b) 8.5; (c) -35 %
C. (a) 13.33 (approx); (b) 11; (c) -25 %
D. (a) 12.5 (approx); (b) 9; (c) -20 %
Correct Answer
A
Correct Option:
(a) 14.29 (approx); (b) 10; (c) -30 %

About This Question

This is Gce Model Questions Vol1 2019 Economics Question 28. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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