PAPER 1

Objective Test (Questions 1–60)

Instructions: Answer all questions. Choose the option that best answers each question.

Basic Economic Concepts

1.

Economics is the study of

A. Money only
B. Wealth only
C. Human behaviour in relation to scarce resources
D. Government activities

Answer: C

2.

The basic economic problem is

A. Inflation
B. Unemployment
C. Scarcity
D. Taxation

Answer: C

3.

Scarcity gives rise to

A. Choice
B. Abundance
C. Surplus
D. Waste

Answer: A

4.

Opportunity cost refers to

A. Cost of production
B. Next best alternative forgone
C. Cost of labour
D. Fixed cost

Answer: B

5.

A want is

A. Something necessary for survival
B. A desire capable of giving satisfaction
C. A factor of production
D. An economic resource

Answer: B

6.

Human wants are

A. Limited
B. Fixed
C. Unlimited
D. Constant

Answer: C

7.

Which of the following is a free good?

A. Petrol
B. Air
C. Bread
D. Land in urban areas

Answer: B

8.

The reward for labour is

A. Rent
B. Interest
C. Profit
D. Wage

Answer: D

9.

The reward for land is

A. Wage
B. Profit
C. Rent
D. Interest

Answer: C

10.

A production possibility curve illustrates

A. Inflation rate
B. Population growth
C. Alternative combinations of goods produced with available resources
D. Tax revenue

Answer: C

11.

Demand means

A. Desire for a commodity only
B. Desire backed by ability and willingness to pay
C. Ability to buy goods
D. Purchase of goods

Answer: B

12.

The law of demand states that

A. Demand rises as price rises
B. Demand falls as price falls
C. Demand rises as price falls
D. Demand is constant

Answer: C

13.

A movement along the demand curve is caused by changes in

A. Taste
B. Income
C. Price of the commodity
D. Population

Answer: C

14.

Supply refers to

A. Stock of goods available
B. Quantity producers are willing to offer for sale at various prices
C. Goods produced only
D. Distribution of goods

Answer: B

15.

The law of supply states that

A. Supply increases as price increases
B. Supply decreases as price increases
C. Supply remains constant
D. Supply is unrelated to price

Answer: A

16.

Equilibrium price is determined by

A. Government only
B. Demand only
C. Supply only
D. Interaction of demand and supply

Answer: D

17.

Excess demand leads to

A. Surplus
B. Shortage
C. Equilibrium
D. Deflation

Answer: B

18.

A shift in demand curve may result from

A. Price change only
B. Change in income
C. Quantity supplied
D. Production cost

Answer: B

19.

Complementary goods include

A. Tea and coffee
B. Bread and butter
C. Rice and yam
D. Coke and Pepsi

Answer: B

2026/2027 WAEC/GCE Economics Objective and Essay Questions and Answers

20.

Substitute goods include

A. Car and petrol
B. Bread and butter
C. Tea and coffee
D. Pen and paper

Answer: C

21.

Production refers to

A. Manufacturing only
B. Creation of utility
C. Buying and selling
D. Transportation

Answer: B

22.

The factors of production are

A. Labour, capital, land and entrepreneur
B. Labour, profit, money and goods
C. Capital, demand and supply
D. Market, labour and money

Answer: A

23.

Capital as a factor of production means

A. Money only
B. Manufactured assets used in production
C. Buildings only
D. Shares only

Answer: B

24.

Division of labour leads to

A. Reduced productivity
B. Increased specialization
C. Unemployment only
D. Inflation

Answer: B

25.

The entrepreneur is responsible for

A. Risk bearing
B. Wage payment only
C. Government policy
D. Consumption

Answer: A

26.

Fixed costs remain unchanged in the

A. Long run
B. Short run
C. Very short run only
D. Future

Answer: B

27.

Variable costs change with

A. Production level
B. Time only
C. Inflation only
D. Taxation

Answer: A

28.

Average cost equals

A. Total cost ÷ output
B. Output ÷ total cost
C. Fixed cost ÷ output
D. Revenue ÷ output

Answer: A

29.

Marginal cost refers to

A. Total production cost
B. Cost of one additional unit produced
C. Fixed cost only
D. Variable cost only

Answer: B

30.

Large-scale production may lead to

A. Economies of scale
B. Scarcity
C. Inflation
D. Taxation

Answer: A

31.

A market with many buyers and sellers is

A. Monopoly
B. Perfect competition
C. Duopoly
D. Oligopoly

Answer: B

32.

A monopoly exists when

A. One seller controls the market
B. Two firms dominate
C. Many firms operate
D. Government controls prices

Answer: A

33.

An oligopoly consists of

A. One seller
B. Few large firms
C. Many sellers
D. Two buyers

Answer: B

34.

Price discrimination is commonly associated with

A. Monopoly
B. Perfect competition
C. Retail trade
D. Agriculture

Answer: A

35.

A duopoly consists of

A. Two sellers
B. Two buyers
C. Four firms
D. Many firms

Answer: A

36.

Money serves as

A. Medium of exchange
B. Unit of account
C. Store of value
D. All of the above

Answer: D

37.

The Central Bank is responsible for

A. Retail trading
B. Monetary policy
C. Manufacturing
D. Transportation

Answer: B

38.

Commercial banks primarily accept

A. Taxes
B. Deposits
C. Imports
D. Exports

Answer: B

39.

Cheque is an example of

A. Commodity money
B. Paper money
C. Credit instrument
D. Barter

Answer: C

40.

Inflation means

A. General rise in prices
B. Fall in prices
C. Stable prices
D. Increase in production

Answer: A

41.

Tax is

A. Voluntary payment
B. Compulsory levy imposed by government
C. Business profit
D. Bank charge

Answer: B

42.

Direct tax is paid by

A. Importers only
B. The person on whom it is imposed
C. Retailers only
D. Consumers only

Answer: B

43.

VAT is an example of

A. Direct tax
B. Indirect tax
C. Poll tax
D. Property tax

Answer: B

44.

Government expenditure on roads is

A. Capital expenditure
B. Recurrent expenditure
C. Transfer payment
D. Subsidy

Answer: A

45.

A budget is

A. Government revenue only
B. Government expenditure only
C. Estimate of revenue and expenditure
D. Tax collection system

Answer: C

2026/2027 WAEC/GCE Economics Objective and Essay Questions and Answers

46.

National income refers to

A. Income of government only
B. Total value of goods and services produced in a year
C. Revenue from exports only
D. Personal income

Answer: B

47.

GDP means

A. Gross Domestic Product
B. General Domestic Price
C. Gross Development Plan
D. Government Development Project

Answer: A

48.

Per capita income equals

A. National income divided by population
B. Population divided by GDP
C. Revenue divided by labour force
D. Export divided by imports

Answer: A

49.

Depreciation refers to

A. Increase in value of assets
B. Reduction in value of assets due to wear and tear
C. Tax reduction
D. Profit increase

Answer: B

50.

Economic growth is measured by

A. Increase in national output
B. Increase in imports
C. Increase in taxation
D. Increase in population only

Answer: A

51.

International trade occurs between

A. Regions only
B. Individuals only
C. Countries
D. Firms only

Answer: C

52.

Imports are

A. Goods sold abroad
B. Goods bought from abroad
C. Goods produced locally
D. Services only

Answer: B

53.

Exports are

A. Goods sold to other countries
B. Goods purchased locally
C. Government goods
D. Agricultural goods only

Answer: A

54.

Balance of trade is

A. Imports minus population
B. Difference between exports and imports
C. GDP minus inflation
D. Revenue minus expenditure

Answer: B

55.

A favourable balance of trade occurs when

A. Imports exceed exports
B. Exports exceed imports
C. Imports equal exports
D. Exports disappear

Answer: B

56.

Tariffs are imposed mainly to

A. Encourage imports
B. Protect domestic industries
C. Reduce exports
D. Increase population

Answer: B

57.

Economic development involves

A. Increase in population only
B. Quantitative and qualitative improvement in living standards
C. Increase in taxes only
D. Export growth only

Answer: B

58.

Unemployment refers to

A. Lack of capital
B. Lack of jobs for willing and able workers
C. Inflation
D. Poverty only

Answer: B

59.

The major occupation in Nigeria’s rural areas is

A. Banking
B. Agriculture
C. Insurance
D. Aviation

Answer: B

60.

The principal objective of economic planning is

A. National development
B. Tax collection only
C. Population growth
D. Political campaigns

Answer: A

PAPER 2

ESSAY QUESTIONS AND ANSWERS

Question 1

Define Economics and explain the basic economic problems facing every society.

Answer

Economics is the social science that studies how individuals, firms and governments allocate scarce resources among competing wants. The subject is concerned with decision-making because resources are limited while human wants are unlimited.

Basic Economic Problems

Scarcity

Scarcity arises because available resources are insufficient to satisfy all human wants. Land, labour, capital and entrepreneurial abilities are limited.

Choice

Because resources are scarce, individuals and societies must choose which wants to satisfy and which to postpone.

Opportunity Cost

Every choice involves sacrificing an alternative. The value of the next best alternative forgone is known as opportunity cost.

Fundamental Economic Questions

What to Produce?

Society must decide which goods and services should be produced.

How to Produce?

Producers must determine the most efficient production methods.

For Whom to Produce?

Society must decide how goods and services will be distributed among individuals.

The existence of scarcity makes these questions unavoidable in every economic system.

2026/2027 WAEC/GCE Economics Objective and Essay Questions and Answers

Question 2

Explain the law of demand and discuss the factors affecting demand.

Answer

The law of demand states that all things being equal, the quantity demanded of a commodity increases when its price falls and decreases when its price rises.

Factors Affecting Demand

Income

An increase in consumer income generally increases demand for normal goods.

Population

A larger population increases market demand.

Taste and Fashion

Changes in consumer preferences influence demand significantly.

Prices of Related Goods

Demand for a product may increase if the price of its substitute rises.

Expectations

Consumers may increase purchases if they expect future price increases.

Seasonal Factors

Demand for some products varies according to weather conditions and seasons.

Understanding these factors helps businesses forecast market demand and plan production efficiently.

Question 3

Explain the factors of production and their rewards.

Answer

Factors of production are resources used in the production of goods and services.

Land

Land includes all natural resources used in production.

Reward: Rent

Labour

Labour refers to human effort used in production.

Reward: Wages and Salaries

Capital

Capital consists of man-made assets used to produce other goods and services.

Reward: Interest

Entrepreneur

The entrepreneur organizes other factors of production and bears business risks.

Reward: Profit

These factors work together to create goods and services that satisfy human wants.

Question 4

Discuss the functions of money and explain the qualities of good money.

Answer

Money is anything generally accepted as a medium of exchange and settlement of debts.

Functions of Money

Medium of Exchange

Money facilitates buying and selling.

Unit of Account

Money provides a common measure of value.

Store of Value

Money allows wealth to be saved for future use.

Standard of Deferred Payment

Money facilitates future transactions and credit arrangements.

Qualities of Good Money

• Durability
• Portability
• Divisibility
• Acceptability
• Uniformity
• Scarcity
• Stability in Value

Without money, modern economic activities would be extremely difficult.

Question 5

Explain inflation, its causes, effects and control measures.

Answer

Inflation is a persistent increase in the general price level of goods and services over time.

Causes of Inflation

Demand-Pull Inflation

Occurs when aggregate demand exceeds aggregate supply.

Cost-Push Inflation

Occurs when production costs increase.

Excess Money Supply

Too much money chasing limited goods leads to inflation.

Effects of Inflation

Negative Effects

• Reduces purchasing power.
• Discourages savings.
• Creates uncertainty.
• Worsens income inequality.

Positive Effects

• May encourage investment during moderate inflation.

Control Measures

Monetary Measures

• Increase interest rates.
• Reduce money supply.

Fiscal Measures

• Increase taxation.
• Reduce government expenditure.

Proper control of inflation is essential for economic stability.

2026 WAEC Economics Objective and Essay Questions and Answers

Question 6

Discuss international trade, its advantages and disadvantages.

Answer

International trade refers to the exchange of goods and services between countries.

Advantages

Increased Market Size

Producers gain access to larger markets.

Specialization

Countries specialize according to comparative advantage.

Employment Creation

Export industries generate jobs.

Technology Transfer

Countries gain access to advanced technologies.

Disadvantages

Dependence on Foreign Goods

May weaken local industries.

Unfavourable Balance of Trade

Excessive imports may create deficits.

Economic Vulnerability

Global economic shocks can affect domestic economies.

Despite its challenges, international trade remains a vital driver of economic growth.

Question 7

Explain the role of commercial banks in economic development.

Answer

Commercial banks are financial institutions that accept deposits and provide loans.

Functions

Acceptance of Deposits

Banks mobilize savings from the public.

Granting Loans

They provide funds for businesses and individuals.

Facilitation of Payments

Banks enable efficient financial transactions.

Foreign Exchange Services

They support international trade.

Credit Creation

Commercial banks create credit through lending activities.

Contribution to Economic Development

• Encourages investment.
• Promotes industrial growth.
• Supports entrepreneurship.
• Facilitates trade and commerce.
• Mobilizes savings for productive use.

Commercial banks play a crucial role in national development.

Question 8

Discuss economic development and identify major obstacles to economic development in Nigeria.

Answer

Economic development refers to sustained improvements in living standards, income levels, employment opportunities and overall welfare of citizens.

Indicators of Economic Development

• Rising per capita income.
• Improved healthcare.
• Better education.
• Reduced poverty.
• Increased industrialization.

Obstacles to Economic Development in Nigeria

Inadequate Infrastructure

Poor roads, electricity shortages and weak transportation systems hinder growth.

Corruption

Mismanagement of public resources reduces development effectiveness.

Unemployment

High unemployment limits productivity and income generation.

Low Industrial Capacity

Heavy dependence on imports weakens domestic production.

Political Instability

Policy inconsistency discourages investment.

Poor Educational System

Insufficient skilled manpower limits technological advancement.

Solutions

• Investment in infrastructure.
• Anti-corruption measures.
• Economic diversification.
• Improved education and skills training.
• Promotion of local industries.

Economic development remains essential for improving the quality of life and achieving sustainable national progress.