Neco Model Questions Vol1 2023 Economics Question 3

Practice objective / multiple choice question 3 from the 2023 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • objective

The public holds currency equal to 30 % of bank deposits. The required reserve ratio is 10 % and banks hold excess reserves equal to 2 % of deposits. (a) Compute the money multiplier. (b) If the central bank injects ₦500 million of new reserves into the banking system, what is the resulting increase in the money supply?

Answer Options

A. Money multiplier ≈ 2.86; money supply increase ≈ ₦1.43 billion
Correct Answer B. Money multiplier ≈ 3.10; money supply increase ≈ ₦1.55 billion
C. Money multiplier ≈ 3.33; money supply increase ≈ ₦1.67 billion
D. Money multiplier ≈ 2.50; money supply increase ≈ ₦1.25 billion
Correct Answer
B
Correct Option:
Money multiplier ≈ 3.10; money supply increase ≈ ₦1.55 billion

About This Question

This is Neco Model Questions Vol1 2023 Economics Question 3. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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