WAEC Economics 2025 Theory — Question 7

Model answer

(a) Instruments traded in the money market: (i) Treasury bills - issued by government to borrow, with a maturity of 90 days; (ii) Commercial bills/promissory notes - unsecured debt instruments issued by large corporations to borrow money for a short period; (iii) Banker's acceptance - short-term debts issued by large corporations but secured by banks. (b)(i) Money market: a manufacturer seeks funds here for short-term loans, to meet the daily operating costs of the business, such as raw materials and fuelling, to be repaid within a short period. (ii) Capital market: a manufacturer seeks funds here for long-term loans, to expand operations such as building a new factory or replacing obsolete machinery; loans obtained here are for a longer period. (c) Functions of Development banks: (i) they provide short and medium-term loans for government and investors; (ii) they provide technical and financial advice to government and investors; (iii) they contribute to the training of manpower to improve the productivity of a country.