JAMB Economics questions: Financial institutions

16 questions with answers and explanations. Tap an option to check yourself.

1. Question 1· Financial institutions· JAMB

   When the Central Bank raises the monetary policy rate, it usually

   • Aincreases money supply
   • Bmakes borrowing cheaper
   • Cmakes borrowing dearer and reduces money supply
   • Dhas no effect on banks

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   Explanation and discussion

2. Question 2· Financial institutions· JAMB

   The capital market differs from the money market because the capital market deals in

   • Acoins and notes
   • Bshort-term funds only
   • Cforeign currency only
   • Dlong-term funds

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   Explanation and discussion

3. Question 3· Financial institutions· JAMB

   A main function of commercial banks is to

   • Aaccept deposits and grant loans
   • Bissue currency
   • Cfix exchange rates
   • Dcollect taxes

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   Explanation and discussion

4. Question 4· Financial institutions· JAMB

   Mortgage institutions provide loans mainly for

   • Abuying shares
   • Bimporting goods
   • Cpaying salaries
   • Dbuying or building houses

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   Explanation and discussion

5. Question 5· Financial institutions· JAMB

   The money market deals in

   • Aforeign land
   • Blong-term shares only
   • Cshort-term funds
   • Dgoods

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   Explanation and discussion

6. Question 6· Financial institutions· JAMB

   To reduce the money supply, the Central Bank may

   • Aprint more money
   • Blower the monetary policy rate
   • Creduce the cash reserve ratio
   • Dsell government securities in the open market

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   Explanation and discussion

7. Question 7· Financial institutions· JAMB

   Insurance companies are part of the financial system because they

   • Amobilise savings through premiums and invest them
   • Bprint money
   • Cfix exchange rates
   • Dcollect taxes

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   Explanation and discussion

8. Question 8· Financial institutions· JAMB

   The capital market deals in

   • Aconsumer goods
   • Bshort-term loans only
   • Cforeign exchange only
   • Dlong-term funds

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   Explanation and discussion

9. Question 9· Financial institutions· JAMB

   If the cash reserve ratio is 20%, a new deposit of ₦10,000 can create total deposits of up to

   • A₦12,000
   • B₦8,000
   • C₦50,000
   • D₦200,000

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10. Question 10· Financial institutions· JAMB

    A commercial bank receives a deposit of ₦10,000 and the cash reserve ratio is 10%. The maximum total deposits that can be created in the banking system is

    • A₦1,000
    • B₦90,000
    • C₦10,000
    • D₦100,000

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    Explanation and discussion

11. Question 11· Financial institutions· JAMB

    The Nigeria Deposit Insurance Corporation (NDIC) protects

    • Abank depositors
    • Bshareholders
    • Cborrowers
    • Dimporters

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    Explanation and discussion

12. Question 12· Financial institutions· JAMB

    Development banks provide mainly

    • Along-term loans for agriculture and industry
    • Boverdrafts to individuals
    • Cforeign exchange
    • Dinsurance

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    Explanation and discussion

13. Question 13· Financial institutions· JAMB

    Treasury bills are

    • Ainsurance policies
    • Blong-term company shares
    • Cbank notes
    • Dshort-term government securities

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    Explanation and discussion

14. Question 14· Financial institutions· JAMB

    Raising the cash reserve ratio is used by the Central Bank to

    • Aprint more money
    • Bincrease the money supply
    • Clower interest rates
    • Dreduce banks' ability to lend

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    Explanation and discussion

15. Question 15· Financial institutions· JAMB

    The Nigerian Exchange (stock exchange) is a market where

    • Agoods are imported
    • Bforeign currencies are printed
    • Cshares and other securities are bought and sold
    • Dtaxes are paid

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    Explanation and discussion

16. Question 16· Financial institutions· JAMB

    A function of the Central Bank of Nigeria is to

    • Arun supermarkets
    • Bgrant loans to individuals
    • Ccollect personal income tax
    • Dissue the national currency

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    Explanation and discussion