1. Who is called the father of Economics?

a. J.P Kense
B. David Ricordo
C. Adam Smith
D. Mankew
2. Human wants are_______________?
a. Always fixed
B. Limited
C. Unlimited
D. Likely to decrease over time
3. Which of the following is not one of the basic economic s ?
a. What to produce
B. Who to produce for
C. How to produce
D. How to maximize economic growth
4. The free market involves ?

a. The free provision of products

B. The Subsidizing of products by the government
C. Market forces of supply and demand
D. All trade via barter
5. Which of the following is a normative statement in economics ?

a. More spending by the government reduces poverty

B. Higher taxes lead to less desire to work
C. The Pakistan’s economy is growing fast relative to other SAARC members
D. The government should concentrate on reducing unemployment
6. Macroeconomics deals with?

a. the behavior of the electronics industry

B. the behavior of firms
C. economics aggregates
D. the activities of individual units
7. The study of inflation is part of ?

a. descriptive economics
B. normative economics
C. macroeconomics.
D. microeconomics
8. The total demand for goods and services in an economy is known as_____________?

a. gross national product.

B. national demand.
C. economy-wide demand
D. aggregate demand
9. A recession is ?

a. a period of declining prices.

B. a period of declining unemployment
C. a period during which aggregate output declines.
D. a period of very rapidly declining prices.
10. The circular flow of goods and incomes shows the relationship between?

a. Wages and salaries.

B. income and money
C. goods and services.
firms and households
11. In a planned or command economy, all the economics decisions are taken by the ?
a. Consumers
B. voters
C. government
D. Workers
12. Economics is the study of ?

a. how society manages its unlimited resource

B. how to reduce our wants until we are satisfied.
C. how to fully satisfy our unlimited wants
D. how to avoid having to make trade-offs
13. Raising taxes and increasing welfare payments ?

a. reduces market power

B. Proves that there is such a thing as a free lunch
C. improves efficiency at the expense of equity.
D. improves equity at the expense of efficiency.
14. Foreign trade ?

a. increase the scarcity of resources.

B. makes a country more equitable.
C. allows a country to have a greater variety of products at a lower cost than
if it tried to produce everything to home.
D. None of these
15. Productivity can be increased by ?

a. improving the education of workers

B. raising union wages.
C. raising minimum wages.
D. restricting trade with foreign countries.
16. In a free market?

a. government intervenes
B. government plan production
C. government interferes
D. Prices adjust to reconcile scarcity and desires
17. If you income during one year is Rs10,000 and the following year it is Rs12,000 then
it has grown by ________________?

a. 20%
B. 2%
C. 12%
D. 16%
18. On a graph, a positive linear relationship___________________?

a. moves down to the right

B. moves up to the left
C. moves up to the right
D. moves down to the left
19. When we know the quantity of a product that buyers wish to purchase at each
possible price we know_____________?

a. Demand
B. Supply
C. Excess demand
D. Excess supply
20. The equilibrium price clears the market it is the price at which _________________?

a. Everything is sold
B. Buyers spend all their money
C. Quantity demanded equal quality supplied
D. Excess demanded equals quantity
E. C and D
21. ________ and ___________ do not directly affect the demand curve ?

a. the price of related goods consumer income

B. consumer incomes, tastes
C. the costs of production bank opening hours
D. the price of related goods preferences
22. A demand curve can shift because changing ?

a. incomes
B. prices of related goods
C. tastes
D. all of the above
23. If a price increase of good A increases the quantity demanded of good B, then good
B is a________________?

a. substitute good
B. complementary good
C. bargain
D. inferior good
24. An increase in consumer income will increase demand for a _________ but decrease
demand for a?

a. substitute good, inferior good

B. normal good inferior good
C. inferior good normal good
D. normal good, complementary good
25. The basic economic problems will not be solved by ?

a. Market forces
B. Government intervention
C. A mixture of government intervention and the free market
D. The creation of unlimited resources
26. 1 The process by which resources are transformed into useful forms is
a. capitalisation.
b. consumption.
c. allocation.
d. production.
27. A mixed economy ?

a. Has supply but not demand

B. Has demand but not supply
C. Has supply and demand
D. Has market forces and government intervention
28. The public sector includes ?

a. Investors owning companies

B. Government ownership of assets
C. Market forces of supply and demand
D. All trade via barter
29. The economics the central problem is ?

a. Scarcity
B. Money
C. Consumption
D. Allocation
30. Microeconomics is not concerned with the behavior of ?

a. aggregate demand
B. firms
C. Consumers
D. industries.
31. Aggregate supply is the total amount ?
 a. of labor supplied by all households.
B. Produced by the government.
C. of goods and services produced in an economy.
D. of products produced by a given industry.
32. Inflation is___________________?
a. a decrease in the overall price level.
B. an increase in the overall price level.
C. an increase in the overall level of economic activity.
D. a decrease in the overall level of economics activity
33. Unemployment means that ?

a. there is excess demand in the labour market

B. there are some people who will not work at the going wage rate.
C. people are not willing to work at the going wage rate.
D. at the going wage rate, there are people who want to work but cannot find
work.
34. A student chooses to study because the marginal benefit is greater than the
______________ cost?

a. average
B. expected
C. total
D. marginal
35. In a free market system, the amount of goods and services that any one household gets
depends upon its ?

a. income
B. income and wealth
C. wealth
D. wage and interest income
36. High and persistent inflation is caused by ?

a. unions increasing wages too much

B. OPEC raising the price of oil too much
C. governments increasing the quantity of money too much
D. regulations raising the cost of production too much
37. An increase in the price of beef providers information which ?

a. provides no information because prices in a market system are managed by

planning boards.
B. tells consumers to buy less pork
C. tells producers to produce more beef.
D. tells consumers to buy more beef.
38. Economics is the study of ?

a. Production technology
B. Consumption decisions
 C. how society decides what how and for whom to produce
D. the best way to run society
39. A market can accurately be described as_________________?

a. a place to buy things

B. a place to sell things
C. the process by which prices adjust to reconcile the allocation of resources
D. a place where buyers and sellers meet
40. In the mixed economy________________?

a. economics problems are solved by the government and market

B. economic decisions are made by the private sector and free market
C. economic allocation is achieved by the invisible hand
D. economics s is solved by government departments
41. Macroeconomics is the study of ?

a. individual building blocks in the economy

B. the relationship between different sectors on the economy
C. household purchase decisions
D. the economy as a whole
42. Time series data show information ?

a. about the same point in time over different places

B. about different points in time over the same variable
C. about different variables over different places
D. about different points in time over different places
43. A straight-line diagram can be drawn knowing the ________ and ________?

a. vertical axis and horizontal axis

B. intercept and slope
C. scale and slope
D. intercept and scale
44. If the diagram of a line shows that lower values on the vertical scale are associated
with higher values on the horizontal scale this is an example of ?

a. a nonlinear relationship
B. a positive linear relationship
C. a scatter diagrams
D. a negative linear relationship
45. when a market is in equilibrium ?

a. quantity demanded equals quantity supplied

B. Excess demand and excess supply are zero
C. The market is cleared by the equilibrium price
D. All of the above
46. A supply curve is directly affected by ?
 A. technology
B. input costs
C. government regulation
D. all of the above
47. What is called the difference in the money value between exports and imports
during the specific period of time ?

A. Balance of payment
B. Balance sheet
C. Terms of trade
D. Balance of trade
48. How is termed the legal proceeding in which debtor remains unable to pay his
creditors in full ?

A. Bankruptcy
B. Default
C. Total loss
D. Crash
49. What is called the trade of goods or services without the exchange of money ?

A. Free exchange
B. Liberal Exchange
C. Barter
D. Bilateral Trade
50. Which term is used for an addition to normal payment by a company or extra payment of
gratuity to workers ?

A. Bonus
B. Overtime
C. Prize
D. Gift
51. What is called the sequence of economic activity which is typically characterized by
recession, fiscal recovery, growth and fiscal decline ?

A. Economic Cycle
B. Business Cycle
C. Complete Cycle
D. Cycle Business
52. Term the body of goods and monies from which future income can be derived ?

A. Net assets
B. Solid asset
 C. Holdings
D. Capital
53. What is meant by capital stock ___________?

A. Authorized amount of stock for issue by corporation

B. The total stated or par value of the permanently invested capital of
corporation
C. Both of them
D. None of them
54. Point out the term for producer goods such as machinery that is used in production
of commodities ?

Capital assets
B. Running capital
C. Capital goods
D. Hard capital
55. Which of the following is not a resource as the term is used by
economists?
A. money.
B. land.
C. buildings.
D. labour.
56. 4 Capital, as economists use the term,
A. is the money the fir m spends to hire resources.
B. is money the firm raises from selling stock.
C. refers to the process by which resources are transformed
into useful forms.
D. refers to things that have already been produced that
are in turn used to produce
57. Laborator y (or controlled) experiments cannot be performed in
economics because:
A. of resource scarcity.
B. economics is a natural science.
C. of the difficulty of distinguishing between normative and
positive statements.
D. economics is a social science.
58. Positive statements are:
A. value judgments
 B. verifiable or testable
C. statements in the affirmative
D. good statements
59. The 'law of demand' implies that
A. as prices fall, quantity dem anded increases.
B. as prices fall, demand increases.
C. as prices rise, quantity demanded increases.
D. as prices rise, demand decreases.
60. What effect is working when the price of a good falls and
consumers tend to buy it instead of other goods?
A. the substitution effect.
B. the ceteris paribus effect.
C. the total price effect.
D. the income effect.
61. The quantity demanded (Qd) of a soft drink brand A has
decreased. This could be because:
A. A’s consumers have had an increase in income.
B. the price of A has increased.
C. A’s advertising is not as effective as in the past.
D. the price of rival brand B has increased.
62. Demand curves in P-Q space are derived while holding constant
A. consumer tastes and the prices of other goods.
B. incomes, tastes, and the price of the good.
C. incomes and tastes.
D. incomes, tastes, and the prices of other goods.
63. Suppose the demand for good Z goes up when the price of good
Y goes down. We can say that goods Z and Y are
A. perfect substitutes.
B. unrelated goods.
C. complements.
D. substitutes.
64. If the demand for coffee decreases as income decreases, coffee is
A. a normal good.
B. a complementary good.
C. an inferior good.
D. a substitute good.
65. Which of the following will NOT cause a shift in the demand
curve for compact discs?
A. a change in the price of pre-recorded cassette tapes.
B. a change in wealth.
C. a change in income.
D. a change in the price of compact discs.
66. Which of the following is consistent with the law of supply?
A. As the price of calculators rises, the supply of calculators
increases, ceteris paribus.
B. As the price of calculators falls, the supply of calculators
increases, ceteris paribus.
C. As the price of calculators rises, the quantity supplied
of calculators increases, ceteris paribus .
D. As the price of calculators rises, the quantity supplied of
calculators decreases, ceteris paribus.
67. 10 The price of computer chips used in the manufacture of
personal computers has fallen. This will lead to __________ personal
computers.
A. a decrease in the supply of
B. a decrease in the quantity supplied of
C. an increase in the supply of
D. an increase in the quantity supplied of
68. When there is excess demand in an unregulated market, there is a
tendency for
A. quantity demanded to increase.
B. quantity supplied to decrease.
C. price to fall.
D. price to rise.
69. 12 Equilibrium in the market for good A obtains
A. when there is no surplus or shortage prevailing in the
market
B. where the demand and supply curves for A intersect
C. when all of what is produced of A is consumed
D. all of the above
70. 13 A shift in the demand curve (drawn in the traditional Price-
Quantity space) to the left maybe caused by
A. a decrease in supply.
 B. a fall in income.
C. a fall in the price of a complementar y good.
D. a fall in the number of substitute goods.
71. A shift in the demand curve (drawn in Income-Quantity space) to
the left may be caused by
A. a fall in the price of a complementar y good.
B. a fall in income.
C. a change in tastes such that consumers prefer the good
more.
D. a rise in the number of substitute goods.
72. A movement along the demand curve (drawn in Quantity-Price
space) to the left may be caused by
A. an increase in supply.
B. a rise in income.
C. a rise in the price of a complementary good.
D. a fall in the number of substitute goods.
73. How many different equilibria can obtain when you allow for
shifts in the demand and/or the supply curves?
A. 2
B. 4
C. 8
D. 16
74. What will happen to equilibrium price and quantity when the
demand curve shifts to the left and the supply curve shifts to the right
A. price falls unambiguously but the effect on quantity
cannot be determined
B. both price and quantity falls unambiguously
C. quantity falls unambiguously but the effect on price
cannot be deter mined
D. the effect on both price and quantity cannot be determined
75. What will happen to equilibrium price and quantity when both
the demand and supply curves shift to the left
A. price falls unambiguously but the effect on quantity
cannot be determined
B. both price and quantity falls unambiguously
C. quantity falls unambiguously but the effect on price
cannot be determined
 D. the effect on both price and quantity cannot be determined
76. A price ceiling imposed by the government can cause a shortage
(excess demand)
A. when the price ceiling is above the free (or unregulated)
market price
B. when the price ceiling is below the free (or
unregulated) market price
C. when the price ceiling is equal to the free (or unregulated)
market price
D. either of the above
77. What is the effect of imposing a fixed per unit tax on a good on
its equilibrium price and quantity?
A. Price falls, quantity rises
B. Price rises, quantity falls
C. Both price and quantity fall
D. Both price and quantity rise
78. If a government were to fix a minimum wage for workers that
was higher than the market clearing equilibrium wage, economists
would predict that
A. more workers would become employed.
B. there would be more unemployment.
C. the costs and prices of firms employing cheap labour
would increase.
D. wages in general would fall as employers tried to hold
down costs.
79. If a household's money income is doubled,
A. the budget constraint will shift in and parallel to the old
one.
B. the budget constraint is not affected.
C. the budget constraint will swivel outward at the Y-
intercept.
D. the budget constraint will shift out parallel to the old
one .
80. 17 The curve that is traced out when we keep indifference curves
constant and move the budget line parallel to its original position is
A. the income-consumption curve.
B. the Engel curve.
 C. the demand curve.
D. the income-demand curve.

81. Profit- maximising fir ms want to maximize the difference

between
A. total revenue and total cost.
B. marginal revenue and marginal cost.
C. marginal revenue and average cost.
D. total revenue and marginal cost.
82. Which statement is FALSE?
A. Fixed costs do not depend on the fir m's level of output.
B. Fixed costs are zero if the firm is producing nothing .
C. Fixed costs are the difference between total costs and total
variable costs.
D. There are no fixed costs in the long run.
83. Which of the following is most likely to be a variable cost for a
fir m?
A. The monthly rent on office space that it leased for a year.
B. The franchiser's fee that a restaurant must pay to the
national restaurant chain.
C. The interest payments made on loans.
D. Workers’ wages.
84. The costs that depend on output in the short run are
A. total variable costs only.
B. both total variable costs and total costs.
C. total costs only.
D. total fixed cost only.
85. The short run, as economists use the phrase, is characterized by
A. a period where the law of diminishing returns does not
hold.
B. at least one fixed factor of production, and firms
neither leaving nor entering the industr y.
C. C. all inputs being variable.
D. no variable inputs - that is all of the factors of production
are fixed.
86. Which of the following is a correct statement about the
relationship between average product (AP) and marginal product (MP)?
 A. If AP is at a maximum, then MP is also.
B. If TP is declining then AP is negative.
C. If AP exceeds MP, then AP is falling.
D. If AP = MP, then total product is at a maximum.
87. Engineers for Imran Bike Company have determined that a 15%
increase in “all” inputs will cause a 15% increase in output. Assuming
that input prices remain constant, you correctly deduce that such a
change will cause _________ as output increases.
A. Long- run average costs to increase
B. Long- run marginal costs to increase
C. Long-run average costs to remain constant
D. Long- run average costs to decrease
88. 10 Suppose Isa Khan’s Ice Cream experiences economies of
scale up to a certain point and diseconomies of scale beyond that point.
Its long-run average cost curve is most likely to be
A. upward sloping to the right.
B. U-shaped.
C. horizontal.
D. downward sloping to the right.
89. The formula for average fixed costs is
A. dTFC/dq.
B. TFC/q.
C. q/TFC.
D. TFC - q.
90. 15 The formula for AVC is
A. q/TVC.
B. dTVC/dq.
C. dq/dTVC.
D. TVC/q.
91. The amount of profit a firm makes can be shown on a diagram
using
A. the AC and AR curves.
B. the MR and AR curves.
C. the AC and MC curves.
D. the MR and MC curves.
92. A firm’s choice of profit-maximising output can be shown on a
diagram using
 A. the AC and AR curves.
B. the MR and AR curves.
C. the AC and MC curves.
D. the MR and MC curves.
93. A firm will shut down in the short run if
A. total variable costs exceed total revenues.
B. average cost exceeds price.
C. total costs exceed total revenues.
D. it is suffering a loss.
94. If you were running a fir m in a perfectly competitive industry
you would be spending your time making decisions on
A. how much of each input to use .
B. how much to spend on advertising.
C. what price to charge.
D. the design of the product.
95. Market power is
A. a firm's ability to charge any price it likes.
B. a firm's ability to raise price without losing all demand
f or its product.
C. a firm's ability to sell any amount of output it desir es at
the market-determined price.
D. a firm's ability to monopolise a market completely.
96. When ______ substitutes exist, a monopolist has ______ power
to raise price.
A. more; more
B. fewer; less
C. no; infinite
D. more; less
97. If a firm has some degree of market power, then output price
A. becomes a decision variable for the firm.
B. is determined by the actions of other firms in the industry.
C. no longer influences the amount demanded of the firm's
product.
D. is guaranteed to be above a firm's average cost.
98. The cosmetics industr y is not considered by economists to be a
good example of perfect competition because
A. firms spend a large amount of money on advertising .
 B. profit margins are very high for both producers and retailers.
C. there are a very large number of firms in the industry.
D. there are many government health controls on cosmetic products.
99. If fir ms can neither enter nor leave an industr y, the relevant time
period is the
A. long run.
B. immediate run.
C. intermediate run.
D. short run.
100. In the long run
A. there are no fixed factors of production.
B. all firms must make economic profits.
C. a firm can vary all inputs, but it cannot change the mix of inputs it
uses.
D. a firm can shut down, but it cannot exit the industry.
101. A normal rate of profit
A. is the rate of return on investments over the interest rate on risk-free
government bonds.
B. is the rate that is just sufficient to keep owners or investors
satisfied .
C. Means zero return for owners or investors.
D. is the difference between total revenue and total costs.
102. If Wafa Enterprises is earning a rate of return greater than the
return necessary for the business to continue operations, then
A. total costs exceed normal profit.
B. the firm is earning an economic profit .
C. normal profit is zero.
D. total costs exceed total revenue.
103. Economic profits are
A. the difference between total revenue and total costs.
B. anything greater than the normal opportunity cost of investing.
C. a rate of profit that is just sufficient to keep owners and investors
satisfied.
D. the opportunity costs of all inputs.
104. The slope of the marginal revenue curve is
A. the same as the slope of the demand curve.
B. half as steep as the demand curve.
 C. twice as steep as the demand curve.
D. always equal to one.
105. In a monopoly, marginal revenue is
A. less than price at low levels of output and greater than price at high
levels of output.
B. always greater than price.
C. lower than price for all units other than the first.
D. always equal to price.

106. Monopolistic competition differs from perfect competition primarily

because
A. in perfect competition, fir ms can differentiate their products.
B. in monopolistic competition, firms can differentiate their products .
C. in monopolistic competition, there are relatively few firms.
D. in perfect competition, there are no barriers to entr y.
107. In monopolistic competition, fir ms achieve some degree of market
power
A. by producing differentiated products .
B. because of barriers to entry into the industry. C. because of barriers to exit
from the industry.
D. by virtue of size alone.
108. A monopolistically competitive firm that is incurring a loss will
produce as long as the price that the firm charges is sufficient to cover
A. advertising costs.
B. fixed costs.
C. marginal costs.
D. variable costs.
109. A fir m in a monopolistically competitive industry
A. must lower price to sell more output.
B. sells a fixed amount of output regardless of price.
C. can sell an infinite amount of output at the market-determined price.
D. must raise price to sell more output.
110. The “long-run” equilibrium outcomes in monopolistic competition and
perfect competition are similar in the sense that under both market structures
A. firms will only earn a normal profit.
B. the efficient output level will be produced in the long run.
C. fir ms will be producing at minimum average cost.
D. fir ms realise all economies of scale.
111. A form of industry structure characterised by a few firms each large
enough to influence
market price is
A. monopolistic competition.
B. monopoly.
C. perfect competition.
D. oligopoly.
112. When one fir m in the cooking oil market started an advertising
campaign that stressed the nutritional value of its cooking oil, all other
cooking oil manufacturers started similar advertising campaigns. This
suggests that the cooking oil market is
A. monopolistically competitive.
B. oligopolistic.
C. perfectly competitive.
D. indeterminate from this information.
113. An industry that has a relatively small number of firms that dominate
the market is called
A. a natural monopoly.
B. a colluding industry.
C. a merged industry.
D. a concentrated industry.
114. Price discrimination involves
A. fir ms selling different products at different prices to different consumers.
B. firms selling the same product at different prices to different
consumers.
C. consumers discriminating between different sellers on the basis of the
different prices they quote for different products.
D. consumers discriminating between different sellers on the basis of the
different prices they quote for the same product.
115. A study of how increases in the minimum wage rate will affect
the national unemployment rate is an example of
A. descriptive economics.
B. normative economics.
C. macroeconomics.
D. microeconomics.
116. Aggregate supply is the total amount
A. of goods and services produced in an economy.
B. produced by the government.
C. of products produced by a given industry.
D. of labour supplied by all households.
117. The total demand for goods and services in an economy is
known as
A. aggregate demand.
B. national demand.
C. gross national product.
D. economy-wide demand.
118. Deflation is
A. an increase in the overall level of economic activity.
B. an increase in the overall price level.
C. a decrease in the overall level of economic activity.
D. a decrease in the overall price level.
119. A recession is
A. a period of declining prices.
B. a period during which aggregate output declines.
C. a period of declining unemployment.
D. a period of falling trade volumes.
120. Involuntary unemployment means that
A. people are not willing to work at the going wage rate.
B. find work at the going wage rate, there are people who want
to work but cannot
C. there are some people who will not work at the going wage rate.
D. there is excess demand in the labour market.
121. A cut in the income tax rate designed to encourage household
consumption is an example of
A. expansionary demand-side policy.
B. contractionary demand-side policy.
C. expansionary supply-side policy.
D. contractionary supply-side policy.
122. A cut in the tax rate designed to reduce the cost of capital and
hence encourage business investment is an example of
A. expansionary demand-side policy.
B. contractionary demand-side policy.
C. expansionary supply-side policy.
D. contractionary supply-side policy.
123. Macroeconomics is the branch of economics that deals with
A. the economy as a whole.
B. imperfectly competitive markets.
C. only the long run adjustments to equilibrium in the economy.
D. the functioning of individual industries and the behaviour of
individual decision-making units - business firms and households.
124. A group of modern economists who believe that price and
wage rigidities do not provide the only rationale for macroeconomic
policy activism are called:
A. New-Keynesians.
B. Keynesians.
C. Monetarists.
D. The Classical school.
125. Macroeconomic theory that emphasised the theories of Keynes
and deemphasized the Classical theory developed as the result of the
failure of
A. economic theory to explain the simultaneous increases in
inflation and unemployment during the 1970s.
B. fine tuning during the 1960s.
C. the economy to grow at a rapid rate during the 1950s.
d. the Classical model to explain the prolonged existence of high
unemployment during the Great Depression .
126. Keynes believed falling wages were not a solution to persistent
unemployment because
A. falling wages demoralised workers.
B. this would reduce the purchasing power of labourers as
consumers.
This in turn would bleaken firms’ prospects of selling more
goods,
hence inducing them to cut their investment (and hence labour)
demand.
C. the unemployment was caused by frictional and structural factors.
D. wages would fall more than required to clear the labour market.
127. The practice of using fiscal and monetary policy to stabilise the
economy is
known as
A. fine tuning of demand
B. monetarism
C. laissez faire economics
D. supply side economics
128. According to Classical models, the level of employment is
determined
primarily by
A. interest rates.
B. the level of prices.
C. the level of aggregate supply in the economy
D. the level of aggregate demand for goods and services.
129. According to Keynes, the level of employment is determined
by
A. interest rates.
B. the level of prices.
C. the level of aggregate supply in the economy
D. the level of aggregate demand for goods and services.
130. According to the Classical model, unemployment
A. could not persist because wages would fall to eliminate the
excess
supply of labour.
B. could persist for long periods of time because wages are not
flexible.
C. could be eliminated only through government intervention.
D. could never exist.
131. To get the economy out of a slump, Keynes believed that the
government
should
A. increase both taxes and government spending.
B. increase taxes and/or decrease government spending.
C. cut both taxes and government spending.
d. decrease taxes and/or increase government spending .
132. Aggregate demand refers to the total demand for all
domestically produced goods and services in an economy generated
from
A. the household and government sectors.
B. the household sector.
C. all sectors except the rest of the world.
D. all sectors including the rest of the world.
133. Government policies that focus on increasing production rather
than demand are called:
A. fiscal policies.
B. monetary policies.
C. incomes policies.
D. supply-side policies.
134. In macroeconomics, equilibrium is defined as that point at which
A. planned aggregate expenditure equals aggregate output .
B. planned aggregate expenditure equals consumption.
C. aggregate output equals consumption minus investment.
D. saving equals consumption.
135. If injections are less than withdrawals at the full-employment level of national
income, there is
A. an inflationary gap.
B. equilibrium.
C. a deflationary gap.
D. hyperinflation.
136. The accelerator theory of investment says that induced investment is
determined by
A. the rate of change of national income.
B. expectations.
C. the level of national income.
D. the level of aggregate demand.
137. The diagram that shows the mone y received and paid out by each sector of
the economy is the
A. income-price diagra m.
B. income-expenditures diagram.
C. circular flow diagram.
D. aggregate demand-aggregate supply diagram.
138. If both the no. of unemployed people and the size of the labour force increase
by 10,000, then
A. the unemployment rate will remain the same.
B. the unemployment rate will increase.
C. the unemployment rate will decrease.
D. we cannot tell.
139. Which of the following could be a reason for the problem of “lack of jobs”
being overestimated:
A. the existence of disguised unemployment
B. people are underemployment
C. people holding only one job (as opposed to multiple jobs)
D. the existence of child labour
140. Which of the following is not a cost of voluntary unemployment?
A. potential output of the economy is greater than actual output
B. government loses tax revenue
C. firms lose (potential) revenues due to operating below capacity
D. mental stress undergone by the unemployed persons
141. The length of a business cycle would be measured from
A. peak to trough.
B. trough to peak.
C. peak to peak.
D. the slump to the expansion.
142. If the economy is in the expansionary phase of the business c ycle, aggregate
demand is likely to be______ , unemployment is likely to be ______ , inflation is
likely to be ______ , and the current account of the balance of payments is likely to
be moving towards ______.
A. rising; falling; rising; deficit
B. static; low; rising; deficit
C. falling; falling; falling; surplus
D. falling; rising; falling; surplus
143. If the economy is at the peak of the business cycle, aggregate demand is likely
to be ______ ,unemployment is likely to be ______ , inflation is likely to be
______ , and the current account of the balance of payments is likely to be moving
towards ______.
A. rising; falling; rising; deficit
B. static; low; rising; deficit
C. falling; falling; falling; surplus
D. falling; rising; falling; surplus
144. If the economy is approaching the trough phase of the business cycle,
aggregate demand is likely to be ______ , unemployment is likely to be ______ ,
inflation is likely to be ______, and the current account of the balance of payments
is likely to be moving towards ______.
A. rising; falling; rising; deficit
B. static; low; rising; deficit
C. falling; falling; falling; surplus
D. falling; rising; falling; surplus
145. Which of the following is not true regarding the effects of growth on the
balance of payments and vice versa?
a. Generally, growth raises incomes which will translate into higher consumption
and higher imports, causing the current account of the BOPs to deteriorate.
B. If growth is “export-led”, it will boost the current account surplus of the BOPs.
C. If the current account deficit reflects an underlying private sector resource
deficit, it is likely to be bad for future growth.
D. If the current account reflects rising imports of militar y equipment by the
government, it might not be beneficial for economic growth.
146. The automatic stabilisation function of fiscal policy ensures that government
expenditures______(i)______ and government revenues _____(ii)_____ during
recessions.
(i) (ii)
A. decrease decrease
B. decrease increase
C. increase decrease
D. increase increase
147. Let us say assume the Pakistani government is facing a fiscal deficit. Which
of the following would not constitute a possible method of financing this deficit?
A. printing rupees (borrowing from the central bank)
B. selling dollars in the foreign exchange market
C. imposing new taxes or raising existing tax rates
D. borrowing from an international financial institution
148. The increase in base money divided by the corresponding induced increase in
commercial bank
deposits is the
A. bank's line of credit.
B. reserve ratio.
C. current ratio.
D. money multiplier.
149. If the State Bank of Pakistan wished to pursue a 'tight' monetar y policy, it
would
A. lower the required reserve ratio and the statutory liquidity ratio.
B. lower interest rates .
C. buy government securities on the open market.
D. sell government securities on the open market.
150. A checking deposit (or current account) held at a commercial bank is
considered __________ of that bank.
A. an asset.
B. net worth.
C. a liability.
D. capital.
151. Which of the following activities is one of the responsibilities of the State
Bank of Pakistan?
A. Monitoring the financial health of banks and non-bank financial
insitutions .
B. Auditing the various agencies and departments of the government.
C. Issuing bonds on international capital markets to finance the fiscal deficit.
D. Loaning money to other countries that are friendly to Pakistan.
152. A bank has excess liquidity reserves to lend but is unable to find a willing
borrower. This will__________ the size of the mone y multiplier.
A. reduce
B. increase
C. have no effect on
D. double
153. The quantity of money demanded increases with income. Thus if income
increases, the opportunity
cost of holding mone y must go up in order to reduce mone y demand and re-
establish equilibrium in the money market. This relation is captured by:
A. an upward sloping LM curve.
B. a downward sloping L curve.
C. a downward sloping IS curve.
D. the circular flow of mone y in the economy.
154. When economists speak of the 'demand for money,' which of the following
questions are they asking?
A. How much cash do you wish you could have?
B. How much wealth would you like?
C. How much income would you like to earn?
D. What proportion of your financial assets do you want to hold in non-interest
bearing forms?
155. Which of the following events will lead to a decrease in the demand for
money?
A. An increase in the level of aggregate output.
B. A decrease in the supply of money.
C. A decrease in the interest rate.
D. A decrease in the price level.
156. If the government increases its spending, but this causes prices to rise, what
will “eventually” happen to the equilibrium income and interest rate?
A. Both income and the interest rate will remain unchanged
B. income will come down, but the interest rate will go up
C. income will go up, but the effect on the interest rate cannot be predicted
D. interest rates will go down, but the effect on income cannot be predicted
157. If the income elasticity of mone y demand and the Keynesian multiplier, both
increase in an economy (ceteris paribus), how will the relative effectiveness of
monetary and fiscal policy change?
A. Fiscal policy will become relatively more effective than monetary policy
B. Fiscal policy will become relatively less effective than monetary policy
C. The relative effectiveness of fiscal and monetary policy will remain unchanged
D. Both fiscal and monetary policy will become more effective.
158. Which of following is a key assumption of a perfectly competitive
market?
A. Firms can influence market price.
B. Commodities have few sellers.
C. It is difficult for new sellers to enter the market.
D. Each seller has a very small share of the market.
159. A firm maximizes profit by operating at the level of output where:
A. Average revenue equals average cost.
B. Average revenue equals average variable cost.
C. Total costs are minimized.
D. Marginal revenue equals marginal cost.
160. The demand curve facing a perfectly competitive firm is:
A. Downward-sloping and less flat than the market demand curve.
B. Downward-sloping and more flat than the market demand curve.
C. Perfectly horizontal.
D. Perfectly vertical.
161. For which of the following market structures is it assumed that
there are barriers to entry?
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. All of the above
162. A market with few entry barriers and with many firms that sell
differentiated products is:
A. Purely competitive.
B. A monopoly.
C. Monopolistically competitive.
D. Oligopolistic.
163. Which of the following does not refer to macroeconomics?
A. The study of aggregate level of economic activity.
B. The study of causes of unemployment.
C. The study of causes of inflation.
D. The study of the economic behavior of individual decision-making
units such as consumers, resource owners and business firms.
164. In perfect competition, product price is:
A. Greater than marginal revenue.
B. Equal to marginal revenue.
C. Equal to total revenue,Greater than total revenue.
165. A price taker is:
A. A firm that accepts different prices from different custom ers.
B. A consumer who accepts different prices from different firms.
C. A firm that cannot influence the market price.
D. Both (b.) and (c.).
166. Which of following is a key assumption of a perfectly competitive
market?
E. Firms can influence market price.
F. Commodities have few sellers.
G. It is difficult for new sellers to enter the market.
H. Each seller has a very small share of the market.
167.What is the cost effective ?

A. Cheap things
B. Substandard things
C. Economical in terms of the goods or services received for the money spent
D. Free in terms of the goods or services received for the money spent

168. Cost of production plus a fixed rate of profit is called ?

A. cost plus
B. Cost effective
C. End price
D. Consumer price

169. Which term is used for a bank account which can be operated at will ?

A. Saving Account
B. Fixed account
C. Current account
D. Fluctuated account

170. The term Remittance refers to_______________?

A. Sending of money to someone at distance

B. The sum of money sent
C. Both of them
D. None of them
 171. A payment is made in return for some transference of privilege. What this payment is
called ?

A. Royalty
B. Rent
C. Share
D. Intellectual royalty

172. What is sales tax_____________?

A. Levied on the retail price of merchandise and collected by retailer

B. Tax deducted at source
C. Tax on local produce
D. Tax on gross sale

173. When supply exceeds demand, sellers must lower prices to stimulate sales, when
demand exceeds supply, prices increase as buyers compete to buy goods. What this
theory is called in economics?

A. Cost push theory

B. Supply and Demand theory
C. Fundamental theory
D. Ricardo’s theory

A country’s fundamental system of transportation, communications, and other aspects of its

physical capabilities are called ?

A. Infrastructure
B. Basic structure
C. Fundamentals
D. Basic infrastructure

A company’s first sale of stock to the public is called ?

A. Public Offering
B. First Public Offering
C. Initial Public Offering (IPO)
D. Going Public

A seller of goods or services writes a bill that is submitted to a purchaser for payment. What this bill is
called?
0

A. Demand draft
B. Draft
C. Invoice
D. Bill of Intent

Name a market that is characterized by a small number of producers who often act together to
control the supply of a particular good and its market price ?

A. Oligopoly
B. Monopoly
C. Oligopsony
D. Grey market

Possibility of negative events or changes in the business climate of country is called?

A. Domestic risk
B. Political risk
C. National risk
D. Country risk

What is measured by Gross domestic product (GDP)?

A. Value of all economic activity within nation’s border

B. Economic output of a country
C. Economic activity of federal government
D. None of these