WAEC Economics questions: Financial institutions

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

1. Question 1· Financial institutions· WAEC

   A commercial bank creates credit mainly through

   • Aprinting currency
   • Bcollecting taxes
   • Cselling shares
   • Dgranting loans and overdrafts

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   Explanation and discussion

2. Question 2· Financial institutions· WAEC

   The market for long-term loanable funds is the

   • Acapital market
   • Bmoney market
   • Ccommodity market
   • Dforeign exchange market

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   Explanation and discussion

3. Question 3· Financial institutions· WAEC

   The Central Bank of Nigeria controls the money supply by

   • Aaccepting deposits from the public
   • Bopen market operations
   • Cgranting overdrafts to individuals
   • Dselling insurance

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   Explanation and discussion

4. Question 4· Financial institutions· WAEC

   The Nigerian Exchange (NGX) deals mainly in

   • Alending to farmers
   • Bprinting currency
   • Cissuing insurance
   • Dbuying and selling shares and bonds

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   Explanation and discussion

5. Question 5· Financial institutions· WAEC

   The Central Bank of Nigeria is the

   • Abank that lends to traders
   • Bagent of foreign banks
   • Cowner of all commercial banks
   • Dbanker to the government

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6. Question 6· Financial institutions· WAEC

   If the cash reserve ratio is 10% and a bank receives a deposit of ₦100,000, the maximum total deposits that can be created is

   • A₦100,000
   • B₦1,000,000
   • C₦10,000
   • D₦900,000

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   Explanation and discussion

7. Question 7· Financial institutions· WAEC

   The Nigerian Exchange (stock exchange) is a market for

   • Ashort-term bills only
   • Bforeign currency only
   • Cagricultural produce
   • Dlong-term securities such as shares

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8. Question 8· Financial institutions· WAEC

   A commercial bank accepts deposits and

   • Acontrols monetary policy
   • Bissues currency
   • Cgrants loans to customers
   • Dfixes exchange rates

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9. Question 9· Financial institutions· WAEC

   To reduce inflation, the Central Bank is likely to

   • Areduce reserve requirements
   • Blower interest rates
   • Cbuy government securities
   • Draise the monetary policy rate

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   Explanation and discussion

10. Question 10· Financial institutions· WAEC

    A development bank provides

    • Aforeign exchange only
    • Bonly current accounts
    • Cinsurance
    • Dlong-term loans for development projects

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    Explanation and discussion

11. Question 11· Financial institutions· WAEC

    Which institution is the lender of last resort?

    • Athe stock exchange
    • Ba commercial bank
    • Ca mortgage bank
    • Dthe Central Bank

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12. Question 12· Financial institutions· WAEC

    Commercial banks create credit because

    • Athey sell shares
    • Bthey print money
    • Cgovernment gives them money
    • Donly a fraction of deposits is kept as reserves

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    Explanation and discussion

13. Question 13· Financial institutions· WAEC

    Commercial banks create credit mainly by

    • Alending out part of their deposits
    • Bprinting currency
    • Cbuying shares
    • Dcollecting taxes

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    Explanation and discussion

14. Question 14· Financial institutions· WAEC

    When the Central Bank raises its policy interest rate, it is mainly trying to

    • Aencourage more borrowing
    • Bincrease the supply of money
    • Creduce inflation by making borrowing dearer
    • Dprint more naira

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    Explanation and discussion