Gce Model Questions Vol1 2025 Economics Question 15

Practice objective / multiple choice question 15 from the 2025 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2025 Economics Objective / Multiple Choice Medium Difficulty
Question 15 GCE_MODEL_QUESTIONS_VOL1 • 2025 • ECONOMICS • objective

In an economy the required reserve ratio is 10 %, the excess‑reserve ratio is 2 %, and the public holds cash equal to 30 % of bank deposits. (a) Calculate the money multiplier. (b) If the central bank injects an additional \(£50\) million of high‑powered money, what is the maximum possible increase in the money supply?

Answer Options

A. Money multiplier ≈ 3.50; maximum increase in money supply ≈ £170.0 million
B. Money multiplier ≈ 2.85; maximum increase in money supply ≈ £145.0 million
C. Money multiplier ≈ 4.00; maximum increase in money supply ≈ £200.0 million
Correct Answer D. Money multiplier ≈ 3.10; maximum increase in money supply ≈ £154.8 million
Correct Answer
D
Correct Option:
Money multiplier ≈ 3.10; maximum increase in money supply ≈ £154.8 million

About This Question

This is Gce Model Questions Vol1 2025 Economics Question 15. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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