100 Objective Questions and Answers: Capital Formation, Savings, and Entrepreneur

Welcome to this comprehensive Economics objective question bank on Capital Formation, Savings, Capital Consumption, and Entrepreneur. This resource covers the meaning and stages of capital formation, reasons for low capital formation and low personal savings in West Africa, solutions to the vicious circle of poverty, capital consumption and depreciation, and the role of the entrepreneur. These 100 objective questions are designed for students preparing for SSCE, NECO, NABTEB, UTME, and university examinations. Each question is followed by the correct answer, making it ideal for revision and self-assessment.

Section A: Capital Formation Basics (Questions 1–20)

1. In all countries, in the early stages, the rate of capital formation is usually?
A. Very fast
B. Slow
C. Constant
D. Negative

Answer: B

2. Once some stock of capital has been formed, it can assist?
A. Further capital accumulation
B. Reduced savings
C. Lower investment
D. Decreased production

Answer: A

3. Capital accumulation proceeds with a cumulative effect known as?
A. Multiplier effect
B. Diminishing effect
C. Accelerator effect
D. Inflationary effect

Answer: A

4. The provision of capital in developing countries is used to?
A. Slow down economic development
B. Speed up economic development
C. Reduce savings
D. Increase consumption

Answer: B

5. For making additions to the stock of capital, what is essential?
A. Saving and investment
B. Consumption and spending
C. Importation and exportation
D. Taxation and borrowing

Answer: A

6. In order to accumulate capital goods, some current consumption has to be?
A. Increased
B. Sacrificed
C. Maintained
D. Ignored

Answer: B

7. The greater the extent to which people are willing to abstain from present consumption, the greater the extent that society will devote its resources to?
A. New capital formation
B. Consumer goods production
C. Leisure activities
D. Importation

Answer: A

8. If society consumes all that it produces and saves nothing, future productive capacity of the economy will?
A. Increase
B. Fall
C. Remain constant
D. Double

Answer: B

9. To cut down present consumption and wait for more consumption in the future requires?
A. Short-sightedness
B. Far-sightedness
C. Recklessness
D. Ignorance

Answer: B

10. In economically advanced countries such as the United States of America and Japan, stocks of capital are?
A. Low
B. High
C. Zero
D. Decreasing

Answer: B

11. In Third World countries, the rate of capital formation is?
A. Fast
B. Slow
C. Constant
D. High

Answer: B

12. The process of capital formation consists of how many stages?
A. Two
B. Three
C. Four
D. Five

Answer: B

13. The three stages of capital formation are?
A. Creation, Mobilization, Investment of Savings
B. Production, Distribution, Consumption
C. Saving, Spending, Hoarding
D. Taxation, Borrowing, Lending

Answer: A

14. The creation of savings involves an increase in the volume of?
A. Real savings
B. Consumer goods
C. Imports
D. Money supply

Answer: A

15. Mobilization of savings requires a?
A. Finance and credit mechanism
B. Production and distribution mechanism
C. Consumption and spending mechanism
D. Taxation and subsidy mechanism

Answer: A

16. Investment of savings is the act of investment itself so that resources are actually used for the production of?
A. Consumer goods
B. Capital goods
C. Luxury goods
D. Free goods

Answer: B

17. Capital formation depends on?
A. Saving
B. Consumption
C. Inflation
D. Deflation

Answer: A

18. The greater the extent to which people abstain from present consumption, the greater the?
A. Capital formation
B. Consumer goods production
C. Inflation rate
D. Unemployment rate

Answer: A

19. A country that consumes all it produces and saves nothing will experience?
A. Economic growth
B. Fall in future productive capacity
C. Increased capital stock
D. Higher standard of living

Answer: B

20. The old Chinese proverb about seeing beyond the dawn emphasizes the importance of?
A. Short-term planning
B. Far-sightedness
C. Immediate consumption
D. Extravagant spending

Answer: B

Section B: Stages of Capital Formation (Questions 21–30)

21. The first stage of capital formation is?
A. Investment of savings
B. Mobilization of savings
C. Creation of savings
D. Consumption of savings

Answer: C

22. The second stage of capital formation is?
A. Creation of savings
B. Mobilization of savings
C. Investment of savings
D. Depreciation of savings

Answer: B

23. The third stage of capital formation is?
A. Creation of savings
B. Mobilization of savings
C. Investment of savings
D. Hoarding of savings

Answer: C

24. Creation of savings aims to release resources from the production of?
A. Capital goods
B. Consumption goods
C. Producer goods
D. Investment goods

Answer: B

25. Mobilization of savings ensures that available resources are obtained by?
A. Private investors or government
B. Foreign governments
C. Consumers
D. Hoarders

Answer: A

26. Investment of savings ensures that resources are actually used for the production of?
A. Consumer goods
B. Capital goods
C. Free goods
D. Luxury goods

Answer: B

27. The process of capital formation in a modern free enterprise economy consists of how many stages?
A. One
B. Two
C. Three
D. Four

Answer: C

28. An increase in the volume of real savings so that resources are released for capital formation is called?
A. Mobilization of savings
B. Creation of savings
C. Investment of savings
D. Depreciation of savings

Answer: B

29. A finance and credit mechanism that enables private investors or government to obtain resources for capital formation is called?
A. Creation of savings
B. Mobilization of savings
C. Investment of savings
D. Consumption of savings

Answer: B

30. The act of investment itself so that resources are actually used for the production of capital goods is called?
A. Creation of savings
B. Mobilization of savings
C. Investment of savings
D. Hoarding of savings

Answer: C

Section C: Reasons for Low Capital Formation in West Africa (Questions 31–55)

31. The existence of a vicious circle of poverty leads to?
A. High savings
B. Low savings
C. High investment
D. High output

Answer: B

32. In the vicious circle of poverty, low income results in?
A. Low savings
B. High savings
C. High investment
D. High output

Answer: A

33. Low saving results in a shortage of?
A. Capital for investment
B. Labour for production
C. Land for farming
D. Entrepreneur for business

Answer: A

34. Low investment leads to?
A. Low output
B. High output
C. High income
D. High savings

Answer: A

35. Lack of investment incentives in West Africa leads to?
A. High productivity
B. Low rate of productivity
C. Increased capital formation
D. Economic growth

Answer: B

36. Lack in supply of capital is responsible for?
A. High capital formation
B. Low capital formation
C. Economic development
D. Increased investment

Answer: B

37. Small market size in West African countries hampers?
A. Investment
B. Consumption
C. Saving
D. Taxation

Answer: A

38. Lack of economic and social overheads in West Africa includes lack of?
A. Roads, buildings, communication, education, water, health
B. Cars, phones, computers
C. Food, clothing, shelter
D. Gold, diamonds, oil

Answer: A

39. Lack of skilled entrepreneurs in West Africa leads to?
A. Limited establishment of industries
B. Rapid industrial diversification
C. Balanced economic development
D. High capital formation

Answer: A

40. Unequal distribution of income and wealth in West Africa keeps the rate of capital formation?
A. High
B. Low
C. Constant
D. Increasing

Answer: B

41. Immobility of savings is caused by?
A. Lack of banking and other credit institutions
B. Excess banking facilities
C. High interest rates
D. Low inflation

Answer: A

42. In many places in West Africa, people do not know why they should?
A. Save
B. Consume
C. Invest
D. Produce

Answer: A

43. Hoarding is a problem because saving is used for?
A. Productive purposes
B. Non-productive purposes
C. Investment purposes
D. Capital formation

Answer: B

44. Demographic reasons for low capital formation in West Africa include?
A. High population growth rate
B. Low population growth rate
C. Stable population
D. Declining population

Answer: A

45. A high population growth rate keeps the rate of capital formation low because most income is spent on?
A. Bringing up additional numbers
B. Investing in capital goods
C. Saving for the future
D. Building factories

Answer: A

46. The vicious circle of poverty includes all EXCEPT?
A. Low income
B. Low savings
C. Low investment
D. High capital formation

Answer: D

47. Which of the following is NOT a reason for low capital formation in West Africa?
A. Vicious circle of poverty
B. Lack of investment incentives
C. Small market size
D. Abundance of skilled entrepreneurs

Answer: D

48. Lack of economic and social overheads creates?
A. Proper atmosphere for capital formation
B. Improper atmosphere for capital formation
C. Increased investment
D. High productivity

Answer: B

49. The shortfall of able and efficient entrepreneurs in West Africa is a major reason for?
A. High capital formation
B. Low rate of capital formation
C. Rapid industrial development
D. Economic diversification

Answer: B

50. Extreme unequal distribution of income and wealth restricts?
A. Real investment in the economy
B. Consumption in the economy
C. Saving in the economy
D. Production in the economy

Answer: A

51. Immobility of savings is due to lack of?
A. Banking and other credit institutions
B. Consumer goods
C. Capital goods
D. Labour force

Answer: A

52. In West Africa, the growth rate of population is?
A. Very high
B. Very low
C. Zero
D. Negative

Answer: A

53. Most part of income in West Africa is spent on?
A. Bringing up additional numbers
B. Investing in capital goods
C. Saving for the future
D. Building infrastructure

Answer: A

54. The vicious circle of poverty continues because?
A. Low income results in low savings
B. High income results in high savings
C. High investment results in high output
D. Low savings results in high investment

Answer: A

55. Which of the following is a demographic reason for low capital formation?
A. High population growth rate
B. Low dependency ratio
C. High life expectancy
D. Low birth rate

Answer: A

Section D: Solutions to Vicious Circle / How to Accumulate Capital (Questions 56–70)

56. To break the vicious circle of poverty, any of the elements in the vicious circle can be?
A. Attacked
B. Ignored
C. Increased
D. Preserved

Answer: A

57. Countries could increase the stock of capital available for investment by depending on?
A. Foreign capital in the form of aid, grants and loans
B. Domestic consumption
C. Reduced savings
D. Increased imports

Answer: A

58. Loans tend to be more acceptable than aid because aid from advanced countries usually has?
A. More ‘strings’ attached
B. No conditions
C. Lower interest rates
D. Higher repayment periods

Answer: A

59. Loans could be raised from international institutions such as?
A. IMF and World Bank
B. ECOWAS and AU
C. OPEC and NATO
D. UNESCO and UNICEF

Answer: A

60. Capital can be accumulated by saving money for?
A. Investment
B. Consumption
C. Hoarding
D. Spending

Answer: A

61. Government should encourage saving through?
A. Advertisements in mass media
B. Increased taxation
C. Reduced interest rates
D. High inflation

Answer: A

62. The government could encourage the use of?
A. Mobile banks and saving post offices
B. Foreign banks only
C. Hoarding
D. Consumer goods

Answer: A

63. The government should spend less money on prestigious but non-productive ventures and invest directly in?
A. Productive sectors of the economy
B. Luxury goods
C. Consumer goods
D. Importation

Answer: A

64. The government should encourage banks to give loans to borrowers who are willing to invest in?
A. Production ventures
B. Consumption ventures
C. Luxury ventures
D. Import ventures

Answer: A

65. High taxation on the rich could help to reduce their?
A. Disposable incomes
B. Savings
C. Investment
D. Production

Answer: A

66. Greater use of ploughed back profits means firms could?
A. Re-invest part of their profits
B. Share all profits to owners
C. Consume all profits
D. Hoard all profits

Answer: A

67. Capital can be accumulated by producing more?
A. Capital goods
B. Consumer goods
C. Luxury goods
D. Free goods

Answer: A

68. The accumulation of capital can be facilitated by decreasing?
A. Self-consumption
B. Saving
C. Investment
D. Production

Answer: A

69. A yam farmer who eats fewer yams and sells more can use the money to purchase?
A. Machinery and fertilizer
B. More yams
C. Consumer goods
D. Luxury items

Answer: A

70. Which of the following is a way to accumulate capital?
A. Decreasing self-consumption
B. Increasing consumption
C. Hoarding money
D. Reducing savings

Answer: A

Section E: Reasons for Low Personal Savings in West Africa (Questions 71–85)

71. A major reason for low personal savings in West Africa is?
A. Low level of income
B. High level of income
C. Low population
D. High savings culture

Answer: A

72. In West Africa, income per capita is?
A. Small compared to advanced countries
B. Large compared to advanced countries
C. Equal to advanced countries
D. Not measurable

Answer: A

73. Due to inflationary trend in West Africa, prices of commodities?
A. Go very high
B. Go very low
C. Remain stable
D. Decrease

Answer: A

74. High dependency ratio in West Africa means?
A. Heavy burden on income earners
B. Light burden on income earners
C. More workers than dependents
D. Equal workers and dependents

Answer: A

75. The working population in West Africa forms about what percentage of the total population?
A. 35-40%
B. 50-60%
C. 70-80%
D. 90-100%

Answer: A

76. The extended family system in West Africa contributes to?
A. High dependency ratio
B. Low dependency ratio
C. High savings
D. Low consumption

Answer: A

77. High levels of taxes on properties and facilities affect?
A. Saving ability
B. Consumption ability
C. Production ability
D. Investment ability

Answer: A

78. Many people in West African countries have a higher propensity to?
A. Spend and consume than to save
B. Save than to spend
C. Invest than to consume
D. Produce than to consume

Answer: A

79. Extravagant spending leads to?
A. Low saving
B. High saving
C. High investment
D. Capital formation

Answer: A

80. Inadequate investment channels in West Africa means?
A. Facilities for saving are lacking or inadequate
B. Facilities for saving are abundant
C. Banks are everywhere
D. People save too much

Answer: A

81. In some rural areas of West Africa, there are no?
A. Banks where people can save
B. Markets where people can buy
C. Schools where people can learn
D. Hospitals where people can get treatment

Answer: A

82. Low interest rates on savings deposits?
A. Discourage saving
B. Encourage saving
C. Have no effect on saving
D. Increase saving

Answer: A

83. High initial deposits demanded by banks tend to discourage?
A. Small depositors
B. Large depositors
C. Foreign investors
D. Government officials

Answer: A

84. Which of the following is NOT a reason for low personal savings in West Africa?
A. Low income
B. Inflation
C. High dependency ratio
D. High interest rates on savings

Answer: D

85. The tendency for many people in West Africa to consume all their income is due to?
A. Inadequate investment channels
B. Abundant investment channels
C. High savings culture
D. Low propensity to consume

Answer: A

Section F: Capital Consumption and Depreciation (Questions 86–95)

86. Capital consumption refers to?
A. Using up existing capital stock without replacing worn-out goods
B. Increasing the stock of capital
C. Replacing worn-out capital
D. Maintaining capital goods

Answer: A

87. The gradual wearing out or loss of value of capital is termed?
A. Depreciation
B. Appreciation
C. Inflation
D. Deflation

Answer: A

88. Capital consumption can occur due to a shift in demand, for example?
A. Rise in demand for computers made typewriters obsolete
B. Rise in demand for typewriters
C. Fall in demand for computers
D. Stable demand for all goods

Answer: A

89. Funds set aside for the replacement and maintenance of machinery and equipment are called?
A. Depreciation funds
B. Investment funds
C. Savings funds
D. Consumption funds

Answer: A

90. A machine or capital that has become totally worn-out so that it is of no use at all is said to be?
A. Obsolete
B. Efficient
C. Productive
D. Valuable

Answer: A

91. A country that does not replace worn-out capital is said to be?
A. Consuming capital
B. Accumulating capital
C. Investing capital
D. Saving capital

Answer: A

92. A country that cannot maintain its living stock of capital goods is said to be?
A. Living on capital
B. Growing economically
C. Developing rapidly
D. Saving adequately

Answer: A

93. A person is said to be living on capital if he has to augment his present income by?
A. Drawing on his past savings
B. Increasing his current income
C. Borrowing from friends
D. Working overtime

Answer: A

94. If further production is to take place and progress maintained, worn-out and out-of-date capital have to be?
A. Replaced
B. Ignored
C. Increased
D. Consumed

Answer: A

95. Capital consumption leads to?
A. Greater emphasis on consumption of consumer goods
B. Increased saving for replacing capital stock
C. More production of capital goods
D. Higher investment

Answer: A

Section G: Entrepreneur (Questions 96–100)

96. An entrepreneur organizes?
A. Human and material resources for production
B. Only human resources
C. Only material resources
D. Only financial resources

Answer: A

97. Entrepreneurship is a special sort of human effort that takes on the risk of bringing together?
A. Labour, capital and land
B. Labour, capital and money
C. Land, money and machinery
D. Capital, money and equipment

Answer: A

98. The reward for the entrepreneur is?
A. Profit or loss
B. Rent
C. Wage
D. Interest

Answer: A

99. The entrepreneur is the?
A. Risk bearer
B. Wage earner
C. Rent collector
D. Interest receiver

Answer: A

100. Which of the following is a function of the entrepreneur?
A. Organizing other factors of production
B. Providing land
C. Providing labour
D. Providing capital only

Answer: A

Answer Key Summary

Conclusion

This comprehensive objective question bank on Capital Formation, Savings, Capital Consumption, and Entrepreneur covers the meaning and stages of capital formation, reasons for low capital formation and low personal savings in West Africa, solutions to the vicious circle of poverty, capital consumption and depreciation, and the role of the entrepreneur. Students preparing for SSCE, NECO, NABTEB, UTME, and university examinations will find these 100 questions invaluable for revision and self-assessment. Master these questions to build a strong foundation in capital formation and entrepreneurial concepts and excel in your examinations.