Neco Model Questions Vol1 2025 Economics Question 8

Practice essay / theory question 8 from the 2025 Neco Model Questions Vol1 Economics examination. This question covers Money and Banking .

Neco Model Questions Vol1 2025 Economics Essay / Theory

Topic: Money and Banking

Question 8 NECO_MODEL_QUESTIONS_VOL1 • 2025 • ECONOMICS • essay

The Central Bank of Nigeria (CBN) has provided the following information for the first quarter of 2024: - Total commercial bank deposits: ₦ 8,000 bn - Required reserve ratio (RRR): 15 % - Cash reserve ratio (CRR): 5 % - Excess reserves held by banks: 2 % of total deposits - The CBN purchases ₦ 200 bn of government securities in the open market. - Velocity of money (V) is estimated at 4. - The price level is assumed to be unchanged. Using the data above, answer the following questions:

Question Parts

( a )

Calculate the theoretical maximum money supply that could be created from the given deposits using the simple money multiplier formula.

( b )

Given that banks keep excess reserves equal to 2 % of total deposits, determine the actual increase in the money supply resulting from the CBN's open‑market purchase of ₦ 200 bn government securities.

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About This Question

This is Neco Model Questions Vol1 2025 Economics Question 8. It is one of the essay questions from the 2025 Neco Model Questions Vol1 Economics examination.

The question covers Money and Banking .

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