50 Objective Questions, 5 Theory Questions, and Full Answers
Introduction
Economics is a core subject for Commercial students in the WAEC 2026/2027 WASSCE. It is also taken by many Arts and Social Science students. Scoring an A requires that you understand both the theory behind economic principles and how to apply them to real situations. WAEC Economics is not just about definitions. It tests your ability to interpret graphs, analyze data, and write reasoned arguments about how resources are produced, distributed, and consumed.
The WAEC Economics syllabus covers demand and supply, production, market structures, national income, money and banking, international trade, and economic development. Every year, these core topics produce the majority of both objective and theory questions. If you master these areas, you are already most of the way to your A grade.
This guide gives you 50 practice objectives and 5 full theory questions with model answers. Study each one carefully. The explanations behind the correct answers are just as important as the answers themselves.
50 Likely WAEC 2026/2027 WAEC 2026/2027 Economics Objective Questions
Each question includes four options. The correct answer is marked with ✅. Study the reasoning behind each correct choice, not just the answer itself.
Q1. Economics is best defined as:
A. The study of money
B. The science of allocating scarce resources to satisfy unlimited human wants ✅
C. The history of trade
D. The study of how banks work
Q2. The law of demand states that:
A. As price rises, demand rises
B. As price falls, demand falls
C. As price rises, quantity demanded falls, other things being equal ✅
D. Demand and supply always balance
Q3. A shift in the demand curve to the right indicates:
A. A fall in demand
B. An increase in the price of the good
C. An increase in demand at all price levels ✅
D. A decrease in supply
Q4. Which of the following is NOT a determinant of supply?
A. Cost of production
B. Technology
C. Consumer income ✅
D. Price of related goods
Q5. When demand is perfectly elastic, the demand curve is:
A. Vertical
B. Downward sloping
C. Horizontal ✅
D. Upward sloping
Q6. Which of the following best describes opportunity cost?
A. The price of a good in the market
B. The cost of producing an extra unit of a good
C. The value of the next best alternative forgone ✅
D. The total cost of all goods in a basket
Q7. A monopoly is a market where:
A. Two firms control supply
B. There are many firms competing freely
C. Only one firm produces a good with no close substitute ✅
D. Government sets all prices
Q8. The GDP of a country measures:
A. The total value of imports and exports
B. The total value of goods and services produced within the country in a year ✅
C. The total value of government spending
D. The wealth of all citizens abroad
Q9. Inflation is defined as:
A. A fall in the level of prices
B. A sustained rise in the general price level ✅
C. An increase in the money supply
D. A temporary increase in interest rates
Q10. Which of the following is a function of the Central Bank of Nigeria?
A. Accepting deposits from the public
B. Granting loans to individuals
C. Regulating the money supply and acting as banker to the government ✅
D. Selling goods on credit
Q11. A regressive tax is one where:
A. The rich pay a higher percentage of their income
B. Everyone pays the same amount
C. The people with low-income pay a higher percentage of their income than the rich ✅
D. Tax rate increases as income rises
Q12. What happens at equilibrium in a market?
A. Supply exceeds demand
B. Demand exceeds supply
C. Quantity demanded equals quantity supplied ✅
D. Price is at its lowest point
Q13. Which type of unemployment results from workers moving between jobs?
A. Structural unemployment
B. Cyclical unemployment
C. Frictional unemployment ✅
D. Seasonal unemployment
Q14. An increase in the money supply is likely to lead to:
A. Deflation
B. Recession
C. Inflation ✅
D. Lower prices
Q15. The price elasticity of supply measures:
A. How consumers respond to price changes
B. How the quantity supplied responds to price changes ✅
C. How government responds to inflation
D. The speed of production change
Q16. Subsistence agriculture is characterized by:
A. Large-scale commercial farming for export
B. Production mainly for personal consumption with little or no surplus ✅
C. Use of tractors and modern equipment
D. Farming by corporations
Q17. Which of the following is a feature of perfect competition?
A. One seller with control over price
B. Differentiated products
C. Many buyers and sellers with homogeneous products ✅
D. Barriers to entry
Q18. Nigeria’s main export commodity is:
A. Cocoa
B. Cotton
C. Crude oil ✅
D. Iron ore
Q19. Comparative advantage means:
A. A country produces all goods better than others
B. A country produces a good at a lower opportunity cost than another country ✅
C. A country imports more than it exports
D. A country avoids trade with others
Q20. The multiplier effect in economics refers to:
A. The increase in prices caused by inflation
B. The way an initial increase in spending leads to a larger overall increase in income ✅
C. The impact of technology on production
D. The growth of the banking sector
Q21. Privatization means:
A. The government taking over private businesses
B. The transfer of government-owned enterprises to private ownership ✅
C. The banning of foreign investment
D. Regulating private companies
Q22. Demand-pull inflation is caused by:
A. Rising costs of production
B. Excess demand in the economy beyond what can be supplied ✅
C. A shortage of workers
D. Import restrictions
Q23. Which of the following is a merit good?
A. Cigarettes
B. Education ✅
C. Luxury cars
D. Alcohol
Q24. The balance of trade measures:
A. The difference between total exports and total imports of goods ✅
B. The total value of government borrowing
C. The net flow of capital between countries
D. The exchange rate of a currency
Q25. A fall in the value of a country’s currency relative to others is called:
A. Revaluation
B. Appreciation
C. Depreciation ✅
D. Deflation
Q26. Entrepreneurs are rewarded with:
A. Wages
B. Rent
C. Interest
D. Profit ✅
Q27. Which of the following is NOT a function of money?
A. Medium of exchange
B. Store of value
C. Unit of account
D. Creation of employment ✅
Q28. Division of labour leads to:
A. Unemployment
B. Increased specialization and productivity ✅
C. Reduced output
D. Decreased skills
Q29. A trade union is best described as:
A. A company that trades internationally
B. A government body that regulates markets
C. An association of workers formed to protect their interests ✅
D. A group of employers
Q30. Public goods are characterized by:
A. Excludability and rivalry
B. Non-excludability and non-rivalry ✅
C. High production costs
D. Government pricing only
Q31. Which of the following is an example of a variable cost?
A. Factory rent
B. Insurance premium
C. Raw materials ✅
D. Management salaries
Q32. The circular flow of income shows:
A. How taxes are collected
B. How goods flow between firms and households as a continuous loop ✅
C. How banks create money
D. How government spends revenue
Q33. Economic development is best described as:
A. A rise in GDP alone
B. An improvement in material welfare AND the overall quality of life ✅
C. Increased government borrowing
D. A fall in unemployment rates only
Q34. The main aim of the World Trade Organization (WTO) is:
A. To provide loans to developing countries
B. To regulate and promote free international trade ✅
C. To manage exchange rates
D. To control the global money supply
Q35. Which is an internal economy of scale?
A. Improved local road infrastructure
B. Lower input costs when many firms operate in one area
C. Buying inputs in bulk at a discount due to a firm’s own size ✅
D. Government subsidies
Q36. The production possibility frontier shows:
A. The maximum combination of two goods an economy can produce with its resources ✅
B. The profit a firm can make
C. Government revenue possibilities
D. Import and export capacity
Q37. Aggregate demand consists of:
A. Consumption + Investment + Government Spending + Net Exports ✅
B. Savings + Investment + Government Spending
C. Imports + Exports + Investment
D. Consumer spending + Government savings
Q38. A tariff is:
A. A limit on the quantity of imports
B. A tax on imported goods ✅
C. A government subsidy for exporters
D. A trade agreement
Q39. The term ‘price floor’ refers to:
A. The minimum price set above equilibrium, preventing prices from falling below it ✅
B. The maximum price allowed in a market
C. The market-determined price
D. A price set below equilibrium
Q40. Which of the following causes a budget deficit?
A. Government spending exceeds government revenue ✅
B. Revenue exceeds spending
C. Imports equal exports
D. Taxes are collected early
Q41. In a command economy, resources are allocated by:
A. The price mechanism
B. Competition between firms
C. Central government planning ✅
D. Consumer preference
Q42. Stagflation refers to:
A. Low inflation and high growth
B. High inflation combined with high unemployment and low growth ✅
C. Rapid economic expansion
D. A budget surplus during inflation
Q43. Which of the following is a measure of economic inequality?
A. GDP growth rate
B. Consumer Price Index
C. Gini Coefficient ✅
D. Balance of payments
Q44. Open market operations are conducted by:
A. The stock exchange
B. Commercial banks
C. The Central Bank ✅
D. The Ministry of Finance
Q45. Which of the following is NOT a fiscal policy tool?
A. Government expenditure
B. Taxation
C. Interest rate changes ✅
D. Government borrowing
Q46. The law of diminishing returns states that:
A. Output increases proportionally with each extra input
B. Adding more of a variable input to a fixed input eventually leads to smaller increases in output ✅
C. All production eventually becomes unprofitable
D. Labour productivity always falls
Q47. An indirect tax is:
A. A tax paid directly to the government by individuals
B. A tax on income
C. A tax on goods and services, collected by sellers on behalf of the government ✅
D. A tax on savings
Q48. Depreciation in economics refers to:
A. A fall in the exchange rate
B. The wearing out or reduction in value of capital assets over time ✅
C. A fall in government revenue
D. A decrease in consumer spending
Q49. Which of the following best describes the term ‘liquidity’?
A. The ability of a bank to lend money
B. The ease with which an asset can be converted to cash ✅
C. The value of a country’s exports
D. The total supply of money
Q50. Consumer surplus is:
A. Unsold goods at the end of a market
B. The amount a consumer pays above the market price
C. The difference between what a consumer is willing to pay and what they actually pay ✅
D. Government benefit to consumers
5 Likely WAEC 2026/2027 WAEC 2026/2027 Economics Theory Questions with Model Answers
Theory questions require organized, well-explained answers. Use the model answers below as a guide for structure, depth, and language. Practise writing your own answers and comparing them to the models.
Theory Question 1
Using a well-labelled diagram, explain the effect of an increase in consumer income on the demand for a normal good. State THREE factors that can cause a shift in the supply curve.
MODEL ANSWER:
EFFECT OF INCOME INCREASE ON DEMAND FOR A NORMAL GOOD:
A normal good is one for which demand increases as consumer income rises. When consumer income increases, buyers can afford more of the good at every price level. This causes the entire demand curve to shift to the right (from D1 to D2).
[Diagram description: Draw a price-quantity graph. The y-axis is Price (P), the x-axis is Quantity (Q). Original demand curve D1 slopes downward. New demand curve D2 is to the right of D1, representing higher quantity demanded at every price level. Label both curves clearly.]
This shift means that at the same price P1, the quantity demanded increases from Q1 to Q2. The equilibrium price also rises from P1 to P2 as supply adjusts.
THREE FACTORS THAT CAUSE A SHIFT IN THE SUPPLY CURVE:
1. Change in Cost of Production: If the cost of raw materials or labour rises, producers are less willing to supply the same quantity at the same price. The supply curve shifts left.
2. Improvement in Technology: Better technology allows producers to produce more at the same cost. The supply curve shifts right.
3. Change in Government Policy: A government subsidy reduces production costs and shifts supply to the right. A new tax on production shifts supply to the left.
Theory Question 2
What is unemployment? Explain FOUR types of unemployment and suggest TWO ways of reducing unemployment in Nigeria.
MODEL ANSWER:
DEFINITION:
Unemployment occurs when people who are willing and able to work at the prevailing wage rate cannot find employment.
FOUR TYPES OF UNEMPLOYMENT:
1. Frictional Unemployment: This occurs when workers are between jobs, moving from one employment to another. It is temporary and unavoidable in any economy.
2. Structural Unemployment: This results from fundamental changes in the economy, such as when industries decline or when the skills workers have no longer match the jobs available. Example: a typist who loses their job because computers have replaced typewriters.
3. Cyclical Unemployment: This occurs during economic downturns or recessions, when demand for goods and services falls and firms cut their workforce.
4. Seasonal Unemployment: This occurs when certain industries only operate during part of the year, such as farming, tourism, or construction in certain climates. Workers are unemployed during the off-season.
TWO WAYS OF REDUCING UNEMPLOYMENT IN NIGERIA:
1. Investing in Education and Vocational Training: The government and private sector must fund technical colleges, apprenticeships, and skills programmes that give young Nigerians practical abilities that match what employers need. Graduates with relevant skills find work faster.
2. Creating an Environment Friendly to Small Business Growth: Many Nigerians work in small and medium-sized enterprises. Reducing taxes for new businesses, providing affordable credit, and improving power supply and infrastructure makes it cheaper to run businesses and hire workers.
Theory Question 3
Explain the functions of the Central Bank of Nigeria (CBN) and describe TWO instruments of monetary policy.
MODEL ANSWER:
FUNCTIONS OF THE CENTRAL BANK OF NIGERIA (CBN):
1. Issuing Currency: The CBN has the sole authority to issue legal tender (naira) in Nigeria.
2. Banker to the Government: The CBN holds the accounts of the federal government, manages public debt, and advises the government on financial matters.
3. Banker to Commercial Banks: The CBN holds the reserves of commercial banks and lends to them as a lender of last resort.
4. Regulating and Supervising Banks: The CBN sets rules for commercial banks, licenses new banks, and monitors their activities to protect depositors.
5. Managing the Exchange Rate: The CBN intervenes in the foreign exchange market to influence the value of the naira.
6. Controlling Inflation: The CBN uses monetary policy tools to keep inflation at an acceptable level.
TWO INSTRUMENTS OF MONETARY POLICY:
1. Open Market Operations (OMO): The CBN buys or sells government securities in the open market. When it sells securities, money is taken out of circulation, reducing the money supply and helping to control inflation. When it buys securities, money flows back into the economy.
2. Cash Reserve Ratio (CRR): The CBN requires commercial banks to keep a minimum proportion of their deposits as reserves. Increasing the CRR reduces the amount banks can lend, tightening the money supply. Reducing the CRR allows banks to lend more, expanding money supply.
Theory Question 4
Discuss the meaning and disadvantages of the barter system. Why was money introduced as a medium of exchange?
MODEL ANSWER:
THE BARTER SYSTEM:
The barter system is a method of exchange where goods and services are traded directly for other goods and services, without the use of money. For example, a farmer might exchange a bag of yam for a pair of shoes from a cobbler.
DISADVANTAGES OF THE BARTER SYSTEM:
1. Double Coincidence of Wants: For a trade to happen, both parties must want exactly what the other has. The farmer who has yam must find someone who both has shoes AND wants yam. This is often impossible.
2. Lack of Standard Measure of Value: How many yams is a pair of shoes worth? Without a common unit, it is very difficult to agree on fair exchange ratios.
3. Indivisibility of Goods: Some goods cannot be divided into smaller units for exchange without destroying their value. A cow cannot be cut in half to pay for something worth half a cow.
4. Difficulty of Storing Value: Many goods, especially food, spoil over time. A person cannot save a surplus of yam as wealth because it will rot.
5. Limited Range of Trade: Barter is only practical between small communities. It breaks down over distances and in complex economies with many types of goods and services.
WHY MONEY WAS INTRODUCED:
Money was introduced to solve the problems of barter. As a medium of exchange, money is accepted by everyone, removing the need for double coincidence of wants. A unit of account, money provides a standard way to measure the value of all goods and services. A store of value, money can be saved without spoiling. As a standard for deferred payment, money makes it possible to buy now and pay later. All of these functions make trade faster, fairer, and possible on a much larger scale.
Theory Question 5
With examples, distinguish between demand-pull inflation and cost-push inflation. State THREE effects of inflation on the Nigerian economy.
MODEL ANSWER:
DEMAND-PULL INFLATION:
Demand-pull inflation occurs when total demand in the economy exceeds total supply. In other words, too much money is chasing too few goods. This pulls prices upward.
Example: During a festive season like Christmas, the demand for food, clothing, and transport rises sharply. If supply cannot keep up with this surge in demand, prices rise across the economy.
COST-PUSH INFLATION:
Cost-push inflation occurs when the cost of production increases, causing producers to raise the prices of their goods and services. Rising costs push prices upward from the supply side.
Example: If the price of petrol rises sharply in Nigeria, the cost of transporting goods rises for every producer. Manufacturers, farmers, and traders all pass these extra costs on to consumers through higher prices.
THREE EFFECTS OF INFLATION ON THE NIGERIAN ECONOMY:
1. Erosion of Purchasing Power: As prices rise, a fixed income buys fewer goods. Workers on salaries that do not keep pace with inflation become poorer in real terms. Retirees living on fixed pensions are particularly hard hit.
2. Discouragement of Savings and Investment: When the inflation rate is higher than bank interest rates, people lose money by keeping it in savings accounts. This discourages saving and reduces the pool of funds available for investment.
3. Worsening of Income Inequality: Inflation does not affect everyone equally. Those who own land, property, or goods benefit as the value of these assets rises. Those who only earn wages or rely on fixed incomes fall further behind. This widens the gap between the rich and the people with low-income.
Study Tips: How to Score A in WAEC WAEC 2026/2027 Economics 2026/2027
Tip 1: Draw clear demand and supply diagrams in theory answers. Label all axes and curves.
2: Know the difference between a movement along a curve and a shift of a curve. This distinction appears in almost every WAEC Economics exam.
3: Study real examples from the Nigerian economy: CBN policy, naira depreciation, oil prices, ECOWAS.
4: For essay questions, define key terms first before explaining or arguing.
5: Revise past WAEC Economics theory questions from 2018 to 2025. Themes repeat regularly.
Frequently Asked Questions
Q: What topics appear most in WAEC Economics 2026/2027?
A: Demand and supply (including elasticity and price determination), types of unemployment, inflation, the functions of money, central banking, trade and comparative advantage, and market structures are the most consistently tested topics in WAEC Economics.
Q: Do I need to draw graphs in WAEC Economics?
A: Yes. WAEC Economics theory questions regularly require demand and supply diagrams, production possibility curves, and cost curves. Practice drawing and labelling these clearly. Marks are awarded for correct and labelled diagrams.
Q: How many papers are in WAEC Economics?
A: WAEC Economics has two papers. Paper 1 is the objective (multiple choice) section of 50 questions. Paper 2 is the theory/essay section where you answer questions in detail.
