Gce Model Questions Vol1 2022 Economics Question 28
Practice objective / multiple choice question 28 from the 2022 Gce Model Questions Vol1 Economics examination.
In a simple money‑market model, the demand for money is \(L = kY - hi\) where \(k = 0.4\), \(Y = 5{,}000\) (in millions of naira), and \(h = 5\). The initial money supply is \(M_s = 1{,}500\) million naira.\ (a) Find the equilibrium interest rate \(i\) (as a percentage) before any open‑market operation.\ (b) The central bank then purchases securities, increasing the money supply by \(200\) million naira. Find the new equilibrium interest rate. Give both rates to the nearest whole percent.
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This is Gce Model Questions Vol1 2022 Economics Question 28. It is one of the objective questions from the 2022 Gce Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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