Gce Model Questions Vol1 2019 Economics Question 8

Practice objective / multiple choice question 8 from the 2019 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2019 Economics Objective / Multiple Choice Medium Difficulty
Question 8 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

In an economy the currency‑to‑deposit ratio is \( c = 0.25 \) and the reserve‑to‑deposit ratio is \( r = 0.10 \). The initial monetary base is ₦500 million. (a) Compute the money multiplier. (b) If the central bank purchases securities worth ₦200 million, what is the resulting change in the money supply?

Answer Options

A. Money multiplier = 3.000; Increase in money supply ≈ ₦600 million
B. Money multiplier = 2.857; Increase in money supply ≈ ₦571 million
C. Money multiplier = 4.000; Increase in money supply ≈ ₦800 million
Correct Answer D. Money multiplier = 3.571; Increase in money supply ≈ ₦714 million
Correct Answer
D
Correct Option:
Money multiplier = 3.571; Increase in money supply ≈ ₦714 million

About This Question

This is Gce Model Questions Vol1 2019 Economics Question 8. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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