Neco Model Questions Vol1 2023 Economics Question 42
Practice objective / multiple choice question 42 from the 2023 Neco Model Questions Vol1 Economics examination.
The Central Bank of Nigeria sets a required reserve ratio of 10 % and the public holds 20 % of their deposits as cash (currency‑deposit ratio = 0.20). The initial monetary base is ₦500 million. (a) Compute the initial money supply using the money multiplier. (b) The bank purchases government securities worth ₦50 million, increasing the monetary base. Compute the new money supply, assuming the ratios remain unchanged. (c) Afterwards the Central Bank raises the required reserve ratio to 12 % while the monetary base stays at the level reached in part (b). Compute the resulting money supply.
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About This Question
This is Neco Model Questions Vol1 2023 Economics Question 42. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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