Neco 2023 Economics Question 8

Practice objective / multiple choice question 8 from the 2023 Neco Economics examination.

Neco 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 8 NECO • 2023 • ECONOMICS • objective

The central bank wants to increase the money supply by \(\Delta M = \$200\) million. The required reserve ratio is \(r = 10\%\) and banks hold excess reserves equal to \(e = 2\%\) of deposits. Calculate the increase in reserves the banking system must receive and the amount of government securities the central bank must purchase in an open‑market operation to achieve the target.

Answer Options

A. Increase in reserves = $4 million; Open‑market purchase = $4 million.
B. Increase in reserves = $1667 million; Open‑market purchase = $1667 million.
Correct Answer C. Increase in reserves = $24 million; Open‑market purchase = $24 million.
D. Increase in reserves = $20 million; Open‑market purchase = $20 million.
Correct Answer
C
Correct Option:
Increase in reserves = $24 million; Open‑market purchase = $24 million.

About This Question

This is Neco 2023 Economics Question 8. It is one of the objective questions from the 2023 Neco Economics examination.

Difficulty level: Medium .

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