Gce Model Questions Vol1 2021 Economics Question 25
Practice objective / multiple choice question 25 from the 2021 Gce Model Questions Vol1 Economics examination.
In an economy the public holds currency equal to 30 % of bank deposits (currency‑deposit ratio \(c = 0.3\)). The required reserve ratio is 10 % (\(r = 0.10\)). The central bank purchases £50 million of government bonds from the public, paying by increasing bank reserves. (i) Calculate the change in the money supply resulting from this open‑market operation, using the appropriate money multiplier. (ii) If the initial money supply was £500 million, what is the new total money supply?
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About This Question
This is Gce Model Questions Vol1 2021 Economics Question 25. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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