NOV/DEC ECONOMICS OBJECTIVE TRIAL TEST –(60) QUESTIONS

Economics Practice Quiz

Prepare for your WASSCE examination with these practice questions

These are trial multiple-choice questions in Economics prepared to help you practice effectively for the Nov/Dec Private WASSCE. The questions cover three key topics — Demand and Supply, Production, and Money and Banking — which are frequently tested in the examination. Each question has only one correct answer.

Demand and Supply (20 questions)

1The law of demand states that, ceteris paribus, an increase in the price of a good leads to:

A. An increase in quantity demanded B. A decrease in quantity demanded C. A shift of the demand curve to the right D. A shift of the supply curve to the left

Correct Answer: B
The law of demand states that, all other factors being equal, as the price of a good increases, the quantity demanded decreases, and vice versa.

2A movement along the demand curve is caused by:

A. Change in price of the commodity B. Change in population size C. Change in income D. Change in taste

Correct Answer: A
A movement along the demand curve occurs when there is a change in the quantity demanded due to a change in the commodity's own price, while other factors remain constant.

3If the demand for bread increases after a fall in the price of butter, the two goods are:

A. Complements B. Substitutes C. Inferior goods D. Luxury goods

Correct Answer: A
Complementary goods are used together. When the price of one complement (butter) falls, demand for the other complement (bread) increases.

4A rightward shift of the supply curve means:

A. Increase in supply B. Decrease in supply C. Excess demand D. Disequilibrium

Correct Answer: A
A rightward shift of the supply curve indicates an increase in supply, meaning producers are willing to supply more of the good at each price level.

5The equilibrium price is determined at the point where:

A. Demand exceeds supply B. Supply exceeds demand C. Demand equals supply D. Demand is less than supply

Correct Answer: C
The equilibrium price is established at the intersection of the demand and supply curves, where quantity demanded equals quantity supplied.

6If the price of a good falls and total revenue also falls, demand is said to be:

A. Elastic B. Inelastic C. Perfectly elastic D. Unitary elastic

Correct Answer: B
When demand is inelastic, a decrease in price leads to a proportionally smaller increase in quantity demanded, resulting in a decrease in total revenue.

7When two goods are substitutes, an increase in the price of one will:

A. Decrease the demand for the other B. Increase the demand for the other C. Not affect the other D. Reduce supply of the other

Correct Answer: B
Substitute goods can replace each other. When the price of one substitute rises, consumers switch to the other, increasing its demand.

8Excess supply occurs when:

A. Price is above equilibrium B. Price is below equilibrium C. Demand increases D. Supply decreases

Correct Answer: A
Excess supply (surplus) occurs when the market price is above the equilibrium price, leading to quantity supplied exceeding quantity demanded.

9If the demand for gari is inelastic, an increase in price will:

A. Reduce total revenue B. Increase total revenue C. Not change total revenue D. Eliminate revenue

Correct Answer: B
For inelastic demand, price and total revenue move in the same direction. An increase in price leads to an increase in total revenue.

10The slope of a normal demand curve is:

A. Positive B. Negative C. Zero D. Vertical

Correct Answer: B
The demand curve slopes downward from left to right, indicating an inverse relationship between price and quantity demanded.

11A decrease in supply with demand constant will:

A. Lower equilibrium price B. Raise equilibrium price C. Leave equilibrium price unchanged D. Increase demand

Correct Answer: B
A decrease in supply with constant demand creates a shortage at the original price, leading to an increase in equilibrium price.

12Which of the following will shift the demand curve for rice to the right?

A. A fall in the price of rice B. An increase in consumers' income C. A fall in the cost of producing rice D. A rise in the price of maize

Correct Answer: B
An increase in consumer income (for a normal good) shifts the demand curve to the right, indicating higher demand at each price level.

13The demand for luxury goods is usually:

A. Perfectly inelastic B. Income elastic C. Price inelastic D. Unit elastic

Correct Answer: B
Luxury goods have high income elasticity of demand, meaning demand increases more than proportionally as income rises.

14The main determinant of supply in the long run is:

A. Cost of production B. Population growth C. Government expenditure D. Consumers' tastes

Correct Answer: A
In the long run, production costs are the primary determinant of supply as they affect producers' ability to supply goods at various price levels.

15At equilibrium, there is:

A. Shortage B. Surplus C. Market clearing D. Disequilibrium

Correct Answer: C
At equilibrium, the market clears because quantity demanded equals quantity supplied, leaving no surplus or shortage.

16An upward-sloping supply curve implies:

A. Price and supply are inversely related B. Price and quantity supplied move in the same direction C. Supply is perfectly inelastic D. Supply is constant

Correct Answer: B
The supply curve slopes upward, indicating a direct relationship between price and quantity supplied.

17A change in demand refers to:

A. Movement along the demand curve B. Shift of the demand curve C. Change in supply D. Increase in price

Correct Answer: B
A change in demand refers to a shift of the entire demand curve, caused by factors other than the product's own price.

18When price is held constant and income increases, the demand curve for a normal good will:

A. Shift rightward B. Shift leftward C. Remain unchanged D. Slope downward

Correct Answer: A
For normal goods, an increase in income leads to higher demand at each price level, shifting the demand curve to the right.

19When demand is perfectly elastic, the curve is:

A. Vertical B. Horizontal C. Upward sloping D. Downward sloping

Correct Answer: B
A perfectly elastic demand curve is horizontal, indicating that consumers will buy any quantity at a specific price but none at a higher price.

20The point where demand and supply curves intersect is called:

A. Break-even point B. Equilibrium point C. Demand point D. Supply point

Correct Answer: B
The intersection point of the demand and supply curves is called the equilibrium point, where market price and quantity are determined.

Production (20 questions)

21The factors of production are traditionally grouped into:

A. Land, labour, capital and enterprise B. Money, machines, men and materials C. Wages, rent, profit and interest D. Inputs, outputs, markets and profits

Correct Answer: A
The four factors of production in economics are land (natural resources), labor (human effort), capital (man-made resources), and enterprise (entrepreneurship).

22The reward for land is:

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

Correct Answer: A
Rent is the payment for the use of land and other natural resources in the production process.

23Production can best be defined as:

A. Creation of utilities B. Buying and selling C. Increasing goods in stock D. Manufacturing only

Correct Answer: A
Production involves creating utility—the ability of goods and services to satisfy human wants through form, place, time, and possession utility.

24Division of labour means:

A. All workers perform the same task B. Each worker specializes in a particular task C. Workers exchange goods directly D. Workers own their products

Correct Answer: B
Division of labor involves breaking down the production process into specialized tasks, with each worker focusing on a specific part of the process.

25The productivity of labour depends largely on:

A. Capital available B. Wage rate C. Rent paid D. Size of population

Correct Answer: A
Labor productivity is significantly enhanced by the amount and quality of capital (tools, machinery, technology) available to workers.

26The entrepreneur performs the function of:

A. Buying and selling B. Coordinating other factors of production C. Providing unskilled labour D. Consuming goods

Correct Answer: B
The entrepreneur's primary role is to organize and coordinate the other factors of production (land, labor, capital) to create goods and services.

27One disadvantage of division of labour is:

A. Increase in output B. Boredom and monotony C. Improvement in skills D. Efficient use of time

Correct Answer: B
While division of labor increases efficiency, it can lead to worker boredom and monotony as individuals perform repetitive specialized tasks.

28The basic aim of production is to:

A. Make profits only B. Satisfy human wants C. Increase government revenue D. Employ more workers

Correct Answer: B
The fundamental purpose of production is to create goods and services that satisfy human wants and needs.

29Which of the following is an example of capital?

A. Money in the bank B. A tractor C. Raw land D. Salary paid

Correct Answer: B
In economics, capital refers to man-made goods used in production, such as machinery, tools, and equipment like a tractor.

30The difference between fixed and variable factors is that:

A. Fixed factors cannot be changed in the short run B. Variable factors are permanent C. Fixed factors are always abundant D. Variable factors have no cost

Correct Answer: A
Fixed factors (like factory buildings) cannot be easily changed in the short run, while variable factors (like labor) can be adjusted.

31An increase in output caused by an increase in all factors of production is known as:

A. Internal economies B. External economies C. Returns to scale D. Law of diminishing returns

Correct Answer: C
Returns to scale refer to changes in output when all factors of production are increased proportionally.

32The transformation of raw materials into finished goods is:

A. Direct production B. Indirect production C. Exchange D. Consumption

Correct Answer: B
Indirect production involves creating goods for exchange in the market rather than for direct personal use.

33A production process that requires much human effort and little capital is called:

A. Capital intensive B. Labour intensive C. Land intensive D. Technology intensive

Correct Answer: B
Labor-intensive production relies primarily on human effort rather than machinery or technology.

34In economics, land refers to:

A. Soil only B. All gifts of nature C. Forests only D. Farmland alone

Correct Answer: B
In economics, land includes all natural resources and gifts of nature, not just soil or farmland.

35The reward for capital is:

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

Correct Answer: D
Interest is the return paid for the use of capital in the production process.

36Which of these leads to the law of diminishing returns?

A. Overuse of variable factors on fixed factors B. Increase in capital C. Technological progress D. Division of labour

Correct Answer: A
The law of diminishing returns occurs when increasing amounts of variable factors are applied to fixed factors, eventually leading to declining marginal product.

37When a firm grows due to expansion in size and output, it enjoys:

A. Diseconomies of scale B. Economies of scale C. Constant returns D. Marginal returns

Correct Answer: B
Economies of scale are cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

38The act of creating utility by making goods available where they are needed is:

A. Form utility B. Place utility C. Time utility D. Service utility

Correct Answer: B
Place utility is created when goods are transported to locations where they are needed and valued by consumers.

39An example of indirect production is:

A. A farmer consuming his own maize B. A teacher teaching in school C. A tailor sewing for his family D. A carpenter making chairs for sale

Correct Answer: D
Indirect production involves creating goods for exchange in the market rather than for direct personal use.

40The minimum efficient scale refers to:

A. Lowest output at which long-run average cost is minimized B. Highest output possible C. The point of diseconomies D. Break-even point

Correct Answer: A
The minimum efficient scale is the smallest level of output at which a firm can minimize its long-run average costs.

Money and Banking (20 questions)

41The most important function of money is:

A. Store of value B. Medium of exchange C. Unit of account D. Standard for deferred payment

Correct Answer: B
While money serves several functions, its most important function is as a medium of exchange that facilitates transactions and eliminates the need for barter.

42Which of the following is not a characteristic of money?

A. Durability B. Portability C. Perfect elasticity D. Divisibility

Correct Answer: C
The characteristics of good money include durability, portability, divisibility, uniformity, limited supply, and acceptability—not perfect elasticity.

43Fiat money derives its value from:

A. Backing by gold B. Government decree C. High demand D. Scarcity

Correct Answer: B
Fiat money has value because the government declares it as legal tender and people have confidence in its acceptance.

44One of the earliest forms of money was:

A. Coins B. Cowries C. Paper notes D. Cheques

Correct Answer: B
Cowrie shells were among the earliest and most widely used forms of money in various parts of the world.

45The function of a central bank includes:

A. Accepting deposits from the public B. Printing and issuing currency C. Granting overdrafts to individuals D. Offering loans to small firms

Correct Answer: B
A central bank's primary functions include issuing currency, acting as a banker to the government, and implementing monetary policy.

46Which type of money has value only because people accept it in exchange?

A. Commodity money B. Fiduciary money C. Token money D. Intrinsic money

Correct Answer: B
Fiduciary money (like cheques) has value based on trust and confidence that it will be accepted rather than its intrinsic value.

47Commercial banks create money mainly by:

A. Printing notes B. Giving loans and advances C. Collecting taxes D. Holding reserves

Correct Answer: B
Commercial banks create credit money through the process of lending, where loans become new deposits in the banking system.

48The term "liquidity" in banking refers to:

A. Bank's profit B. Ability to meet obligations C. Amount of deposits D. Total assets

Correct Answer: B
Liquidity refers to a bank's ability to meet its financial obligations as they come due, particularly the ability to pay depositors.

49One disadvantage of barter is:

A. Easy double coincidence of wants B. Lack of store of value C. Availability of standard of value D. Widespread acceptability

Correct Answer: B
The barter system lacks a store of value function as many goods are perishable and cannot be saved for future exchanges.

50The main purpose of the legal tender law is to:

A. Make barter possible B. Ensure currency is accepted for settlement of debts C. Limit the supply of money D. Reduce inflation

Correct Answer: B
Legal tender laws require that a currency must be accepted if offered in payment of a debt, ensuring its widespread acceptability.

51Money supply refers to:

A. All currency notes and coins only B. Currency and demand deposits C. Loans granted by banks D. Government revenue

Correct Answer: B
The narrow definition of money supply (M1) includes currency in circulation plus demand deposits in commercial banks.

52Which of the following instruments is not used by central banks to control money supply?

A. Open market operations B. Bank rate C. Cash reserve ratio D. Advertising campaigns

Correct Answer: D
Central banks use open market operations, reserve requirements, and interest rates to control money supply, not advertising campaigns.

53A cheque is an example of:

A. Legal tender B. Near money C. Fiat money D. Commodity money

Correct Answer: B
Near money refers to non-cash assets that can be quickly converted into cash, such as cheques, savings accounts, and time deposits.

54Inflation reduces the:

A. Value of money B. Supply of money C. Demand for money D. Price level

Correct Answer: A
Inflation erodes the purchasing power of money, reducing the value of each unit of currency.

55Which of the following is a function of commercial banks?

A. Controlling inflation B. Accepting deposits C. Printing money D. Issuing currency

Correct Answer: B
Commercial banks primarily accept deposits from the public and provide loans, among other financial services.

56Which of the following is not a function of money?

A. Store of value B. Medium of exchange C. Source of government revenue D. Unit of account

Correct Answer: C
The primary functions of money are medium of exchange, store of value, unit of account, and standard for deferred payment—not a source of government revenue.

57The central bank acts as a lender of last resort to:

A. The government only B. Commercial banks C. Private individuals D. Foreign investors

Correct Answer: B
As lender of last resort, the central bank provides emergency liquidity assistance to commercial banks facing temporary shortages.

58The narrow definition of money supply (M1) consists of:

A. Notes and coins in circulation only B. Notes, coins and demand deposits C. All bank loans D. Notes, coins, demand and time deposits

Correct Answer: B
M1 money supply includes currency in circulation (notes and coins) plus demand deposits (checking accounts).

59Which of the following reduces the supply of money in circulation?

A. Open market purchase of securities B. Reduction in bank rate C. Increase in cash reserve ratio D. Decrease in taxation

Correct Answer: C
Increasing the cash reserve ratio reduces the amount of money banks can lend, thereby contracting the money supply.

60The main aim of monetary policy is to:

A. Increase bank profits B. Control the supply of money C. Provide subsidies D. Control government spending

Correct Answer: B
The primary objective of monetary policy is to control the money supply and credit conditions to achieve economic stability.

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