Neco Model Questions Vol1 2021 Economics Question 3

Practice objective / multiple choice question 3 from the 2021 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2021 Economics Objective / Multiple Choice Medium Difficulty
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • objective

The Central Bank purchases government securities worth ₦200 million, injecting this amount into the banking system. The public holds a currency‑deposit ratio of 0.25 and the required reserve ratio is initially 0.10. \( (i) \) Calculate the initial change in the money supply resulting from this open‑market operation. \( (ii) \) If the Central Bank subsequently raises the required reserve ratio to 0.15 while the currency‑deposit ratio remains unchanged, what is the new change in the money supply? \( (iii) \) By how much does the money supply change compared with the initial case? Express all monetary values in millions of naira to two decimal places.

Answer Options

A. Initial increase = 750.00 million; after raise = 630.00 million; reduction = 120.00 million
Correct Answer B. Initial increase = 714.28 million; after raise = 625.00 million; reduction = 89.28 million
C. Initial increase = 800.00 million; after raise = 650.00 million; reduction = 150.00 million
D. Initial increase = 700.00 million; after raise = 620.00 million; reduction = 80.00 million
Correct Answer
B
Correct Option:
Initial increase = 714.28 million; after raise = 625.00 million; reduction = 89.28 million

About This Question

This is Neco Model Questions Vol1 2021 Economics Question 3. It is one of the objective questions from the 2021 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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