Neco 2021 Economics Question 8

Practice essay / theory question 8 from the 2021 Neco Economics examination. This question covers Money and Banking .

Neco 2021 Economics Essay / Theory

Topic: Money and Banking

Question 8 NECO • 2021 • ECONOMICS • essay

Consider the monetary system of Country Y. The central bank has set the required reserve ratio at 10 %. The public holds currency equal to 25 % of total bank deposits. The banking system currently has total deposits of ₦ 5,000 billion.

Question Parts

( a )

Calculate the monetary base (M0) for Country Y.

( b )

Using the given reserve ratio and currency‑deposit ratio, compute the money multiplier and the total money supply (M2) that the economy can support.

( c )

If the central bank decides to purchase government securities worth ₦ 200 billion, explain the likely impact on interest rates and inflation in the short run, using the liquidity‑preference framework.

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About This Question

This is Neco 2021 Economics Question 8. It is one of the essay questions from the 2021 Neco Economics examination.

The question covers Money and Banking .

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