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JAMB Economics 1998 Question 33

Question 33

Financial Institutions

If the reserve requirement for commercial banking in Nigeria were 30%, a commercial bank which receives an initial cash deposit of ₦ 3000 is in a position to lend out

  1. A.₦ 9,000
  2. B.₦3,330
  3. C.₦2,770
  4. D.₦2,100.
Show the answer and explanation

Answer: D (₦2,100.)

Explanation

The bank must keep 30% of ₦3000 = ₦900 as reserve, so it can lend ₦3000 − ₦900 = ₦2,100.