Neco Model Questions Vol1 2021 Economics Question 35
Practice objective / multiple choice question 35 from the 2021 Neco Model Questions Vol1 Economics examination.
The monetary base is ₦500 million. The public holds currency equal to 30 % of the total money supply, and the required reserve ratio is 20 % of deposits. (a) Compute the initial money supply using the money multiplier formula \(m = \frac{1 + c}{c + r_r}\), where \(c\) is the currency‑to‑deposit ratio and \(r_r\) is the required reserve ratio. (b) The central bank raises the reserve ratio to 25 % and purchases securities worth ₦100 million, increasing the monetary base to ₦600 million, while the public's currency ratio remains unchanged. Find the new money supply (in million naira, rounded to the nearest million).
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About This Question
This is Neco Model Questions Vol1 2021 Economics Question 35. It is one of the objective questions from the 2021 Neco Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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