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UI Post-UTME Economics 2025 (Model questions) Question 10

Question 10

Money and Inflation

Which of the following policies are used to control inflation?
I. Raising the minimum rediscount rate
II. Open market operations — selling securities
III. Reduction in cash reserve ratio
IV. Decrease in government expenditure

  1. A.I, II and IV only
  2. B.I and III only
  3. C.II, III and IV only
  4. D.All of the above
Show the answer and explanation

Answer: A (I, II and IV only)

Explanation

Raising the rediscount rate, selling securities and cutting government spending all reduce spending. Lowering the cash reserve ratio expands credit and would worsen inflation.