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Economics

Money & Banking

Key Points

  • Functions of money: medium of exchange, unit of account, store of value
  • Money multiplier = 1 / reserve ratio
  • CBN: issues currency, lender of last resort, manages monetary policy
  • Expansionary policy: ↑ money supply; Contractionary: ↓ money supply
  • Open Market Operations: CBN buys/sells government securities

Practice Questions

2 questions
1

If the reserve ratio is 20%, what is the money multiplier?

2

The Central Bank of Nigeria (CBN) uses which tool to control inflation by making borrowing more expensive?

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