Make an “A” practising these questions before any Economics Examination
WAEC PAST QUESTIONS AND ANSWERS ON FINANCIAL INSTITUTIONS FROM 1998 TO DATE
1. Which of the following is a function of merchant banks A. acting as banker’s bank. B. Lending to the
commercial banks as a last resort. C. Controlling inflation in the economy. D. Underwriting and issuing
2. Which of the following is an asset of a commercial bank A. Reserve funds. B. Shareholder’s capital. C. Customer’s deposits. D. Treasury bills.
3. Which of the following is the most liquid asset to a commercial bank A. Money at call and short notice.
B. Treasury Bills. C. Commercial Bills. D. Cash.
4. The drawer of a cheque is the A. person who is to be paid the sum of money as written on the cheque.
B. person who takes the cheque to the bank. C. bank on which the cheque is drawn. D. person who writes out the cheque.
5. The financial institution that specializes in risk spreading is called A. an investment bank. B. a development bank. C. an insurance company. D. the stock exchange.
7. In open market operations, what the Central Bank sells or buys are A. shares. B. debentures. C. securities.
8. Deposits held in a commercial bank are part of A. money supply. B. transfer payments. C. ordinary shares. D. treasury bills.
9. One profitable form of business undertaken by the commercial banks is A. the issuing of cheques. B. the
payment of standing order. C. lending money to borrowers. D. accepting cheques from customers.
10. Which of the following is not a function of the West African Development Bank A. Promotion of both private and public investments in member states.
B. Financing and executing projects in member states.
C. Promotion of social development of member states. D. harmonization of oil prices to the advantage of member states.
11. Time deposit has the same meaning as A. current account. B. demand deposit. C. deposit account.
D. bank deposit.
12. In order to develop the banking habit of rural dwellers, the traditional money lenders should be A. proscribed. B. legalized. C. subsidized. D. heavily taxed.
13. All rates of interest in a country are influenced by the A. bank rate. B. population growth rate. C. wage rate. D. mortgage rate.
14. The liquidity ratio of a commercial bank refers to the A. proportion of the bank’s total assets which should be held in cash and liquid form. B. total amount of cash for the bank’s treasury. C. total amount of cash for the bank in the central bank. D. proportion of the bank’s cash that should be on loan.
15. Open market operations are the processes by which
A. the Central Bank purchases and sells securities. B. commercial bankS purchase and sell securities.
C. business firms buy raw materials freely. D. households buy consumer goods openly.
16. Examples of joint stock banks are A. commercial banks. B. co-operative credit societies. C. central banks. D. development banks.
17. One major function of the central bank is to A. mint
money. B. hold demand deposits and honour cheques. C. act as a medium of exchange. D. control and regulate money supply.
18. The amount of money to be created by commercial banks is actually influenced by the A. legal reserve ratio. B. external reserve. C. external borrowing. D. availability of money and capital market.
19. A financial institution established for the purpose of providing specialized services like acceptance of bills of exchange and equipment leasing is known as A. merchant Bank. B. development Bank. C. central
Bank. D. insurance Company.
20. Which of the following is a liability of a commercial bank A. Deposits. B. Money at call. C. Loans to customers. D. Overdrafts.
21. Which of the following is a function of the Central Bank of Nigeria A. Serving as custodian of important valuables. B. Giving advice to customers. C. Serving as bankers’ bank. D. Creating credit.
22. Which of the following is specialized in lending money
for the purpose of developing real estate A. Merchant
banks. B. Mortgage banks. C. Discount houses. D. Commercial banks.
23. The marketing of government securities by the Central Bank is termed A. retail banking. B. open
market operations. C. selective credit control. D. credit
24. Which one of the following serves as a banker’s bank A. Commercial Bank. B. The Mortgage Bank.
C. The Central Bank. D. Development Bank.
25. Which of the following is a function of merchant banks A. Minting of coins. B. Preparation of government budget. C. Keeping watch on external reserves of the country. D. Acting as acceptance
26. Open Market Operation (OMO) means the A. provision of credit facilities by commercial banks.
B. provision of credit facilities by the mortgage banks. C. buying and selling of government securities
by the central bank. D. procedure for the establishment of commercial banks.
27. Commercial banks settle their inter-bank indebtedness through A. merchant banks. B. central bank. C. development banks. D. stock exchange.
28. Which of the following banks grant credit facilities to individuals wishing to build houses A. Central Bank of Nigeria. B. Nigerian Industrial Development Bank. C. Agricultural Credit Bank. D. Federal Mortgage Bank of Nigeria.
29. The primary objective of the Nigerian Industrial Development Bank (NIDB) is the provision of loans to A. farmers. B. manufacturers. C. estate agents. D. transporters.
30. The proportion of commercial bank’s total assets kept in the form of highly liquid assets is known as A. demand deposit. B. fixed deposit. C. cash ratio. D. moral suasion.
31. A cheque book is issued to customers of a bank operating a A. savings account. B. time deposit
account. C. current account. D. fixed deposit account.
32. Which of the following is a bank’s responsibility to its shareholders A. Making profits. B. Creating money.
C. Paying high interest rate. D. preventing inflation.
33. Development banks mainly provide A. savings account facilities fora developing economy B. foreign exchange facilities for importers and exporters. C. capital for development of specific sectors. D. capital for hire purchase of machinery.
34. The Central Bank controls money supply through all the following except A. lending to the public. B. bank rate. C. legal reserve requirements. D. open market
35. One of the functions of the Central Bank is A. production of goods. B. issuing of currency. C. presenting budgets. D. printing of cheque books.
36. The function of the Central Bank as a lender of last resort means that when all other sources fail, A. the
consumer can always borrow money from the Central Bank. B. the government can ask the Central Bank to print more money. C. commercial banks can raise loans from the Central Bank. D. commercial banks can
deposit money with the Central Bank.
37. Which of the following is not a function of the central bank A. Banker to the Government. B. Banker’s bank.
C. Acceptance of deposits from the public. D. Responsibility for monetary policy.
38. Which of the following is a function of the central bank A. Accepting deposits from the public. B. Lending to the commercial bank. C. Discounting bills of exchange. D. Agent of payment for individuals.
39. The most important function of merchant banks is the A. issuing of currency. B. provision of short terms loans. C. provision of medium and long term loans. D. provision of short and long term loans.
40. In a commercial bank, deposits are A. liabilities.
B. assets. C. capital. D. cash at hand.
41. The lender of last resort in the banking system is the A. industrial bank. B. mortgage bank. C. commercial bank. D. central bank.
42. Which of the following is not the function of a commercial bank A. Accepting deposits from the
public. B. Serving as banker to the government. C. Lending to the public. D. Safekeeping of valuable.
43. Which of the following is the most liquid asset A. Bank notes. B. Silver. C. Bank deposit. D. Cheques.
44. The central bank controls credit in the economy through the use of A. legal tender. B. travellers cheques. C. foreign exchange instruments. D. open market operations.
45. Commercial banks settle their daily interbank indebtedness through the A. Money Market. B. Finance House. C. Acceptance House. D. Clearing House.
46. Mortgage banks give loans to investors on long term basis to A. finance agriculture. B. establish banks.
C. acquire machinery. D. build houses.
47. A financial institution that specializes in giving loans using real assets as collateral security is a
A. development bank. B. insurance company. C. central bank. D. mortgage bank.
48. The function that distinguishes commercial banks from the central bank is that the former A. is a leader
of last resort. B. accepts deposits from the public. C. services the public debt. D. regulates foreign exchange.
49. Credit creation by banks is limited by A. an increase in bank deposits. B. the establishment of specialized banks. C. the non-availability of collateral security. D. the use of cheques for all transactions of the banks.
50. The Central Bank can restrict credit through A. depreciation of assets. B. granting overdraft. C. direct investment. D. open market operation.
51. Creation of money by commercial banks is done by A. increasing the cash ratio. B. printing money.
C. lending to borrowers. D. issuing cheques
52. Which of the following financial institutions was originally known as a Building Society A. Development
bank. B. Insurance company. C. Mortgage bank. D. Merchant bank.
53. A non-bank financial intermediary which is regarded as a pool of risks is the A. co-operative society. B. stock
exchange. C. insurance company. D. post office.
54. Monetary control measures are coordinated by A. development banks. B. merchant banks. C. commercial banks. D. the Central Bank.
55. All the following are assets of a commercial bank except A. cash. B. bills discounted. C. bank deposits.
D. advances to customers.
56. Which of the following is a function of commercial banks A. Issue currencies. B. Accept deposits. C. Are
the banker’s bank. D. Determine the rate of interest.
57. The Central Bank controls commercial banks through all the following measures except A. the use of directives. B. the use of bank rate. C. open market operations. D. accepting deposits.
58. The development banks are essentially different from commercial banks because they A. give medium and long term loans. B. open current accounts for their customers. C. discount bills of exchange. D. are lenders of last resort.
59. One of the functions of a commercial bank is that it A. is responsible for formulating monetary policies. B. accepts demand and time deposits from customers. C. is the lender of last resort. D. is the banker of the government.
60. Foreign exchange control in Nigeria is enforced by the A. Commercial Banks. B. Merchant Banks. C. Mortgage Banks. D. Central Bank.
61. Banks create money by A. giving drafts to customers. B. printing more money. C. lending out deposits to borrowers. D. issuing cheques.
62. The West African Clearing House was established to A. finance development projects in Africa.
B. enhance financial transaction among member countries. C. provide technical assistance to member
countries. D. stabilize price in developing countries.
63. What happens when the central bank increases the bank rate in an economy A. Borrowing is discouraged.
B. Customers increase their borrowing. C. Banks can increase their lending. D. Money supply increases.
64. The use of interest rates to control money supply is a A. control policy. B. monetary policy. C. developmental
policy. D. fiscal policy.
65. What happens when the central bank increases the bank rate? A. Amount of borrowing increases B.
Amount of borrowing decreases C. Supply of money increases D. Commercial banks are not affected.
1. Write short note on (a) Liquidity Ratio? (b) Fixed Deposits?
2. How does the central bank exercise control over commercial banks?
3. Describe any five functions of the Central Bank of Nigeria (CBN)
4. What are the instruments used by the central Bank to control the supply ot money in any economy?
5. Write short note on: (a) Savings account (b) Current account (c) FIxed deposit
6. (a) Distinguish between: (i) a mortgage bank and a merchant bank (ii) a commercial bank and a development bank.
(6) Explain any four functions of commercial banks.
7. Outline the role of development banks in the economic development of West African countries.
8. (a) What is a commercial bank? (b) Describe any tour ways by which the Central Bank controls the amount of credit given by the commercial banks.
9. (a) Distinguish between cash ratio and special deposits. (b) EXplain how cash ratio and special deposits are used as instruments of monetary policy.
10. (a) Define (i) Building Society (i) Central Bank. (b) Highlight any five instruments of the Central Bank in regulating the supply of money.