Economics MCQs Bank
Economics MCQs Bank
Economics MCQs Bank
a) The branch of economics that studies how environmental and natural resources are developed and
managed.
b) The branch of economics that shows how to exploit natural resources as quickly as possible.
c) The psychological study of relationships between humans and natural resources.
d) All answers above are correct.
2. Which of the following answers applies to renewable natural resource?
a) Once the renewable natural resource is used, it is gone forever.
b) Renewable resources can be replenished.
c) Renewable resources are costly to extract.
d) Renewable resources can be harvested at any rate without harming future supplies.
3. Which of the following answers is a non-renewable natural resource?
a) Fish and cattle.
b) Petroleum.
c) Human Resources.
d) All answers above are correct
4. Why study environmental economics?
a) Environmental economics to bring harmony to the economic system and the environment.
b) Study environmental economics to bring harmony to the economic system and the political system.
c) Study environmental economics to find harmony with oneself.
d) Study environmental economics to find harmony with other people
5. When economists say a product has a high cost for a good, what does it mean?
a) Good is available in large quantities to the market.
b) A monopoly is supplying goods.
c) Demand is very high relative to supply.
d) All answers above are correct.
6. Which items from list below is a positive externality?
a) Public Immunization.
b) Traffic jams.
c) A neighbor’s barking dog.
d) All answers above are correct
7. Since 1886, the British Telecom supplies telephone and communication services to its citizens. It has a
100% market share. What kind of company is it?
a) Oligopoly.
b) Duopoly.
c) Monopoly.
d) None of the answers above is correct
8. Which good is a public good?
a) Military and police.
b) Used car market.
c) Insurance from a private company.
d) Petroleum imported from a government-controlled oil field
9. What is Cost-Benefits Analysis?
a) Help person or institution to choose a project with lowest benefits and highest costs
b) Help person or institution to choose a project with highest benefits and lowest costs
c) Help a person or institution to choose a project with the highest benefits and costs
d) Help a person or institution to choose a project with the lowest benefits and costs
10. What is an open resource?
a) Property owned by everyone or absence of ownership (not very sure)
b) Property owned by the government
c) An LLP company owns the property
d) None of the answers above is correct
A and B both seem right. Both are supported by evidence. However in give, I shall go with b
C is also right
69. The marginal propensity to consume (MPC) is the amount by which consumption changes with
the increase in
a. Net income
b. Total income
c. Disposable income
d. None of the above**
70. If consumers think that there are many substitutes for a good, then
a. Supply would tend to be price elastic.
b. Demand would tend to be price elastic.
c. Demand would tend to be price inelastic.
d. None of these answers
71. Producer surplus is the area
a.below the supply curve and above the price.
b. below the demand curve and above the supply curve.
c. below the demand curve and above the price.
d. above the supply curve and below the price.
72. Economics is the study of
a. How society manages its unlimited resources
b. How to reduce our wants until we are satisfied
c. How society manages its scarce resources
d. How to fully satisfy our unlimited wants
73. Which of the following is an example of a price floor?
a. The minimum wage
b. Wheat support price
c. Wheat flour price
d. Both a and b
74. When the market is contestable, incumbent firms must---------------- to avoid the entry of new
competitors.
a. Behave like competitive firms
b. Agree to act together
c. Differentiate their products
d. Practice price discrimination
75. Marginal Propensity to Consume (MPC) is always ……………..
a. Greater than zero
b. Greater than one
c. Equal to one
d. None of them
76. The GDP deflator is also called
a. Explicit price deflator for GDP
b. Implicit price deflator for GDP
c. Both “a” and “b”
d. None of the above
77. Okun’s law describes the relationship between
a. Employment and GDP
b. Unemployment and GDP
c. Government spending and GDP
d. All of the above
78. Which is the most liquid asset
a. Bonds
b. Shares
c. Fixed deposits
d. Saving accounts deposit
79. The investment on those goods that businesses put aside in storage is called
a. Inventory investment
b. Residential investment
c. Business fixed investment
d. None of the above
80. The Mundell-Fleming model is the IS-LM model for a
a. Large open economy
b. Small open economy
c. Small close economy
d. Large close economy
81. Expansionary monetary policy
a. Raises interest rate and raises income
b. Raises interest rate and lowers income
c. Lowers interest rate and raises income
d. Lowers interest rate and lowers income
82. The amount households, firms and the government would like to spend on goods and
services is termed as:
a. Planned expenditure
b. Actual expenditure
c. Unplanned expenditure
d. All of the above
83. Aggregate demand curve shifts due to changes in the
a. Cost of production
b. Output prices
c. Money supply
d. None of the above
84. Aggregate supply is the relationship between the quantity of goods and services supplied and
the:
a. Price level
b. Output level
c. Real interest rate
d. Level of input use
85. An externality is
a. The benefit that accrues to the buyer in a market.
b. The cost that accrues to the seller in a market.
c. The compensation paid to a firm's external consultants.
d. None of them
86. The graph that shows the positive relationship between quantity supplied of a resource and its
price is known as a
a. Supply curve
b. Demand curve
c. Indifference curve
d. Leisure curve
87. Government purchases and taxes are the exogenous variables of
a. Price policy
b. Monetary policy
c. Fiscal policy
d. None of the above
88. The equilibrium in the money market determines the
a. Output level
b. Price level
c. Both “a” and “b”
d. None of the above
89. In an open economy, when net exports are greater than zero, it shows
a. Trade deficit
b. Balanced trade
c. Trade surplus
d. None of the above
90. According to the Philips curve, policy makers who control aggregate demand faces a short-
run tradeoff between:
a. Inflation and unemployment
b. Inflation and employment
c. Both “a” and “b”
d. None of the above
91. According to the Solow model, technological progress causes the value of many variables to
rise together in the steady state. This property is called:
a. Upward growth
b. Downward growth
c. Unbalanced growth
d. Balanced growth**
92. The marginal propensity to consume (MPC) is the amount by which consumption changes with
the increase in
a. Net income
b. Total income
c. Disposable income
d. None of the above**
93. When saving is positively related to the interest rate, a rightward shift in the investment
schedule increases:
a. Interest rate and government spending
b. Interest rate and amount of investment
c. Interest rate and people saving
d. Both “b” and “c”
94. Fisher effect describes the one-for-one relation between
a. Inflation rate and nominal interest rate
b. Inflation rate and real interest rate
c. Both “a” and “b”
d. None of the above
95. If the real exchange rate is high, the
a. Domestic goods are relatively cheap
b. Foreign goods are relatively cheap
c. Domestic goods are relatively expensive
d. Both “b” and “c” **
96. In the mixed economy
a. Economic 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. Economic questions are solved by government departments.
97. Natural resources and capital in the economy depreciate overtime. If we subtract depreciation
from GDP, we get ….....
a. NNP
b. NI
c. GNP
d. None of above
The production possibility curve of the developed country is to the right of the production possibility curve of
the developing country because the developed country is likely to have.
a. Less resources for use in production.
b. Higher levels of productivity per unit capital.
c. A comparative advantage in production.
d. More stable governments.
341. ''Development'' is different from ''growth'', because development takes into account
a. Intertemperal shifts in production possibility curves.
b. Output per unit of capital
c. Income distribution.
d. Efficiency gains resulting from the use of new capital.
342. One criticism of rapid economic growth is that it often results in
a. Negative externalities.
b. A better quality of life.
c. Lessening income inequality.
d. Social benefits.
343. An increase in productivity means
a. An increase in the output / capital ratio
b. An increase in the output / labour ratio
c. An increase in the capital / output ratio
d. An increase in the labour / output ratio
344. Which of the following is not a typical feature of a developing country?
a. A steady migration from urban to rural areas since the 1950's.
b. High rates of population growth.
c. High dependence on primary products as a major component of total production.
d. An agricultural sector that is a large employer of the total labour force.
345. Each of the following is included in the Human Development Index except
a. Life expectancy.
b. Disposable income.
c. Social costs.
d. Adult literacy rates
346. In Rostow's model, a ''take off'' stage is reached when a nation
a. Reaches the full employment level of GDP.
b. Has a surplus on its Current Account (that is, exports of goods and services exceed
imports of goods and services).
c. Is able to fund most of its domestic investment from domestic savings.
d. Is able to avoid running Budget deficits.
347. Per capita income statistics, which are based on a simple average, can be criticised
because:
a. They give an objective and unbiased view of general living standards in a developing country.
b. They indicate how much more food the poor can consume.
c. Increases in the incomes of the rich ''skew'' the measure, making it look like the poor are better
off than they really are.
d. They do not take into account the effects of inflation
348. The Lewis model explains how growth gets started in a less developed economy
a. With an average product of labor in agriculture that is negative.
b. With a downward-sloping supply curve of labor.
c. With a marginal productivity of labor zero or negligible in industry.
d. With a traditional agricultural sector and an industrial capitalist sector
349. Sen's welfare theory relies on
a. Individuals' accomplishments.
b. Individuals' capabilities.
c. Individuals' wealth.
d. Individuals' education.
350. A value of 1 in Gini index represents
a. Low inequality.
b. Maximum inequality.
c. 10/10, 000% inequality.
d. 1% inequality.
351. 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 behavior of individual decision-making units - business
firms and households.
352. GDP falls severely in
a) Recession
b) Depression
c) Boom
d) None of these
353. To see what is going in economy, economists use
a) Theory
b) Models
c) Equations
d) None of these
354. A variable whose value is determined by factors or variables outside model is called
a) Exogenous
b) Dependent
c) independent
d) Endogenous
355. Demand curve’s –ve slope means
a) ↑in P leads to ↓in Qd
b) ↑in P leads to ↑ in Qd
c)↓ in P leads to ↓in Qd
d) None of the above
356. Upward shift in demand curve with constant supply curve causes
a) Increase in Q
b) increase in P
c) decrease in Q
d) decrease in P
e) a and b
357. the prices that are negotiable are called
a) rigid prices
b) sticky prices
c) flexible prices
d) none of these
358. GDP is the value of a country’s overall output of goods and services in a fiscal year at market
prices
a) Excluding net income from abroad
b) including net income from abroad
c)excluding income from abroad
d) including income from abroad
359. Changes in the price level of a market basket of consumer goods and services purchased by
households.
a) WPI
b) PPI
c) SPI
d) CPI
360. GDP does not includes the values of
a) Finished goods
b) stored goods
c) used goods
d) none of these
361. Nominal GDP changes over years because of
a) changes in prices
b) changes in quantity
c) changes in quality
d) a & b
362. Real GDP is equal to
a) nominal GDP – GDP deflator
b)nominal GDP + GDP deflator
c) nominal GDP ÷ GDP deflator
d) GDP deflator ÷ nominal GDP
363. Adam smith was a……….. Economist
a) Keynesian
b) neo-classical
c) classical
d) none of these
364. According to classical economists, quantity of inputs and the production function determines the
a) Total inputs require for production
b) quality of goods and services
c) Total production of goods and services
d) total quantity and prices of goods and services
365. Transformation of inputs into output is called
a) Consumption function
b) production function
c) utility function
d)saving function
366. Amount of output the firm gets from one extra unit of labor, holding the amount of capital fixed is
called
a) MPK
b) APK
c) MPL
d) APL
367. The increase in revenue from an additional unit of labor depends on
a) Marginal product of labor
b) price of output
c) marginal product of capital
d) a & b
368. Investment is a ……………. Relationship with interest rate
a) positive
b) negative
c) constant
d) no relationship
369. Y-C-G is the output that
a) Consumed by consumers and government
b) consumed by consumers and investors
c) Remains after the satisfaction of consumers and government
d) Remains after the satisfaction of consumers and investors
370. National income accounting:
a) Provides a set of rules for determining macroeconomic policy.
b) Provides a set of rules and definitions for measuring economic activity in the aggregate economy.
c) Is a useful tool for microeconomics
d) can be used to measure a nation's output but not its production or consumption.
371. If net capital outflow and trade balance are positive, we
a) are Importing more and exporting less
b) are importing less and exporting more
c) increased both import and export
d) decreased both import and export
372. World’s interest rate is determined by
a) world’s savings and investment
b) World’s deposits and money demand
c) World’s demand for money and supply od money
d) None of these
373. When in a small open economy national savings decreases due to a cut in taxes by government, it
results in
a) Trade deficit
b) trade surplus
c) trade balance
d) increased tariff rate
374. Exchange rates for one currency against another currency are known as
a) Real exchange rate
b) Nominal exchange rate
c) Superfluous exchange rate
d) None of the above
375. If real exchange rate is high
a) Foreign goods are relatively cheap
b) Foreign goods are relatively expensive
c) Foreign goods are absolutely cheap
d) Foreign goods are absolutely expensive
376. What is the impact of expansionary fiscal policy of a country on its exchange rate?
a) Real exchange rate rises
b) Real exchange rate falls
c) Nominal exchange rate rises
d) Nominal exchange rate falls
377. Real exchange rate Not rises in case of
a) Rise in government purchases at home
b) Increased domestic investment
c) Increased domestic consumption
d) Increased world interest rate
378. The link between inflation and unemployment is called:
a) Okun’s law
b) the Lucas curve
c) the Phillips curve
d) the replacement ratio
379. A person is in labor force if he/she is
a) Working at home
b) retired from job .
c) working at a firm
d) a high school student
380. A person is out labor for force if she/he
a) Is employed but currently looking for better job
b) Is laid off and looking for working
c) Is retired
d) Voluntarily quit and looking for work
381. Cyclical unemployment increases when
a) There is a mismatch between job openings and job applicants.
b) More skilled persons are looking for jobs
c) Total demand for goods and services falls in economy
d) All of above
382. The growth model that shows hoe growth in capital, labor force and technology affect the national
output is known as
a) Rostow stages of growth
b) Lewis growth model
c) Solow growth model
d) endogens growth model
383. The Solow growth model describes
a) How output is determined at a point in time.
b) How output is determined with fixed amounts of capital and labor
c) How saving, population growth, and technological change affect output over time
d) The static allocation, production, and distribution of the economy's output
384. At the golden rule of capital
a) MPL=depreciation rate
b) MPK= depreciation rate
c) MRTS= depreciation rate
d) none of these
385. If population growth rate decreases, steady state capital stock
a) Increases
b) decreases
c) remains unchanged
d) becomes unachievable
386. “Poor countries grow faster on average than rich countries” states by
a) Divergence hypothesis
b) convergence hypothesis
c) endogens model
d) none of these
387. The aggregate production function for the Solow growth model assumes …………returns to scale
and ………….marginal productivity of labor and capital.
a) increasing, diminishing
b) constant, diminishing
c) decreasing, increasing
d) increasing, constant
388. When marginal product of labor is equal to depreciation, with n=0, technological change=0
a) Investment is at lowest point
b) Interest rate is very high
c) Consumption is at greatest possible point
d) All of above
389. The convergence hypothesis implies that
a) There are no differences across economies in the long run
b) Rich countries grows faster
c) In equilibrium, the growth rate is zero
d) None of these
390. The main difference between Solow growth model and endogenous growth model is that
a) Only endogenous growth theory allows for technological progress
b) Returns to capital in Solow model are diminishing but constant in endogenous model
c) In Solow model L is the only FOP and in endogenous model k is the only FOP
d) All of above
391. According to Solow growth model, an increase in savings leads to
a) Temporarily growth
b) Persistent growth
c) Long run growth
d) Short run growth
392. According to which growth model, savings and investment can leads to persistent growth
a) Exogenous growth model
b) Lewis model
c) neo-classical growth model
d) endogenous growth model
393. Business cycle shows short run fluctuations in
a) GDP and GNP
b) interest rate and investment
c) employment and output
d) Aggregate demand and suppl
394. Which of the following marks as beginning of business cycle?
a) trough
b) peak
c) recovery
d) recession
395. Which one is not the main concern of macroeconomics?
a) Full employment
b) price stability
c) economic growth
d) prices of regulated utilities
396---------- equation states that supply of money balances is equal to the demand and that demand is
proportional to output.
a) M/P=(M/P)=Y
b) M/I=(M/I)d=kY
c) M/P=(M/P)d=kY
d) M/P=kY
397. The aggregate demand shows
a) Total demand for goods in the economy
b) Partial demand for goods in the economy
c) Total demand for goods and services in the economy
d) Partial demand of goods and services in the economy
398. In M/P= (M/P)d=Y equation, when prices increases
a) Real balance increases
b) real balance decreases
c) real balance remains unchanged
d) real balance fluctuate
399. Any change in money supply or its velocity would results in
a) up-word movement in AD
b) down-word movement in AD
c) shifts in AD
d) none of these
400. When nominal value of output increases, AD
a) Shifts upward
b) shifts downward
c) an up-word movement occurs
d) A down-ward movement occurs
401. What does the aggregate supply curve show?
a) The supply of goods in an economy
b) The supply of services in an economy
c) The total demand for goods and services in an economy
d) The total supply of goods and services in an economy
402. Which of the following depend upon time horizon for its slope?
a) Aggregate demand
b) aggregate supply
c) both AD & AS
d) none of these
403. Why is the long-term aggregate supply curve vertical?
a) In the short run, output never changes
b) In the short run, output is fixed by the factors of production
c) In the long run, output never changes
d) In the long run, output is fixed by the factors of production
404.Which of the following curves does not appear in the AS-AD model?
a) Short run AS
b) long run AS
c) AD
d) long run AD
405. The level of output is called full employment level in
a) Long run
b) short run
c) both in long run and short run
d) none of these
406. In the long run, any shift in AD results in
a) An increase in output
b) decrease in output
c) increase in prices d) decrease in prices
407. How long run aggregate supply curve can shift?
a) Due to a short run change in investment
b) Due to a short run change in demand
c) Due to a long run change in consumption
d) Due to a long run change in investment
408. In the long run equilibrium in market, when LRSC and SRDC intercut each other
a) SRSC crosses them from above side
b) SRSC crosses them from below that point
c) SRSC crosses them at the same point of intersection
d) SRSC don’t cross them
409. In the long run equilibrium when a prices decrease
a) Economy reaches at peak of business cycle
b) Economy moves from recovery to recession
c) Economy recovers from recession
d) None of these
410. Demand and supply shocks occurs due to
a) Exogenous change
b) endogenous changes
c) changes in domestic fiscal policy
d) changes in foreign fiscal policy
411 Stabilization policy refers to the actions taken to
a) Sharpen the severity of long-run economic fluctuations
b) Reduce the severity of long-run economic fluctuations
c) Sharpen the severity of short-run economic fluctuations
d) Reduce the severity of short-run economic fluctuations
412 Alternative of classical theory is presented by
a) Adam Smith
b) mercantilist economists
c) John Maynard Keynes
d) marshal
413 Which theory means different things to different people?
a) Keynesian
b) classical
c) mercantilist
d) none of these
414 Which school of thought worked with the assumptions of constant velocity and highly flexible
wages and prices?
a) Keynesian
b) classical
c) mercantilist
d) none of these
415 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.
416 The relationship between the interest rate and the level of income that arises in the money market
showed through
a) IS-curve
b) LM-curve
c) offer curve
d) Lorenz curve
417 at the Keynesian cross
a) Actual investment=planned investment
b) Government expenditures= revenue
c) Export=imports
d) All of above
418 To achieve equilibrium, firms changes their
a) Production technique
b) level of inputs
c) inventories
d) none of these
419 When government expenditures increases output of economy
a) Increases with more extent
b) increases with less extent
c) remains unchanged
d) Decreases with more extent
420 The multiplier of Government expenditures explains through
a) Y/G = 1 / 2- MPC
b) Y/G = 1 / 1- MPC
c)Y/G = 1 / 1- MPS
d) Y/T= 1 / 1- MPS
421 The goods market and the money market are linked together by
a) monetary policy
b) fiscal policy
c) interest rate
d) labor market
422 We can expect the IS-curve to get flatter as
a) Money demand becomes less sensitive to changes in the interest rate
b) The MPS decrease
c) The MPC decreases
d) In government expenditures multiplier decreases
423 Which of these policy measures will make the IS-curve steeper and shift it to the left?
a) A decrease in money supply
b) a decrease in transfer payments
c) an increase in government expenditures
d) an increase in income tax rate
424 The LM-curve becomes flatter if
a) Money demand becomes less sensitive to changes in the interest rate
b) Money demand becomes less sensitive to changes in income
c) Money demand becomes more sensitive to changes in income
d) The monetary policy multiplier becomes larger
425 If money demand becomes less sensitive to interest rate changes, the LM-curve will
a) Shift to the right
b) Shift to the left
c) Becomes steeper
d) Becomes falter
426 If the marginal propensity to consume increases,
a) The expenditures mulitipiler increases
b) The IS-LM becomes steeper
c) The IS curve remains unchanged
d) All of above
427 In an IS-LM model, a decrease in the income tax rate will
a) Increase output and the interest rate
b) Increase consumption and decrease the interest rate
c) Make the IS-curve steeper
d) Decrease the expenditure multiplier
428 A movement along the AD-curve from left to right is equivalent to
a) A shift of the IS-curve to the right due to a decrease in interest rates
b) A shift of the LM-curve to the right due to an increase in real money balances
c) A shift of the LM-curve to the right due to an increase in nominal money supply
d) A movement along the LM-curve from left to right due to lower real money balances
429 The increase in demand for money due to an increase in income is called
a) Precautionary demand
b) speculative demand
c) transactions demand for money
d) all of above
430 When one of the curve in IS-LM model shifts,
a) Short run equilibrium of the economy changes
b) Long run equilibrium of the economy changes
c) Both short run and long run equilibrium of the economy changes
d) Economy remains in equilibrium
431 A reduction in government purchases cause
a) Interest rate to increase
b) Output to decrease
c) Interest rate and output to decrease
d) Interest rate and output to increase
432 When money supply increases in economy
a) Interest rate falls and investment drops
b) Interest rate rises and investment decreases
c) Interest rate falls and investment increases
d) Interest rate rises and investment decreases
433 Monetary transmission mechanism refers to
a) Cut in spending on goods and services induced by monetary contraction
b) Greater spending on goods and services induced by monetary contraction
c) Cut in spending on goods and services induced by monetary expansion
d) Greater spending on goods and services induced by monetary expansion
434 A positive change in government spending would shifts the
a) Aggregate supply curve upward
b) Aggregate supply curve downward
c) Aggregate demand curve upward
d) Aggregate demand curve downward
435 If there is an increase in govt. spending, AD curve shifts upward and output market clears then
a) Real value of money decreases
b) Real value of money increases
c) Nominal value of money decreases
d) Nominal value of money increases
436 If government spending increases in short run, there would be positive impact on
a) Y, P & r
b) Y, C & r
c) Y, I & C
d) Y, P & I
437 If government spending increases in short run, which one remains unchanged?
a) Output
b) prices
c) interest rate
d) investment
438 If government spending increases in long run, ------ and ------ remains unchanged.
a) Output and investment
b) interest rate and investment
c) output and consumption
d) prices and consumption
439 Effect on prices and interest rate when government spending increases in long run
a) is positive
b) is negative
c) no effect
d) positive on prices and negative on interest rate
440 If money supply increases in short run, there would be positive impact on
a) Y, P & r
b) Y, C & r
c) Y, I & C
d) Y, P & I
441 If money supply increases in long run, there would be positive impact on
a) Output
b) prices
c) investment
d) all of above
442 If money supply increases in long run, there would be no impact on
a) Output
b) interest rate
c) consumption
d) investment
e) All of above
443 The expected deflation causes
a) Interest rate to rise
b) IS curve to shift downward
c) Investment to decline
d) All of above
444 Which of the following is not an assumption of mundell-fleming model?
a) Domestic interest rate is equal to world interest rate
b) Prices are fixed exogenously
c) Money supply is fixed
d) All factors of production are fully employed
445 The mundell-fleming model has three components
a) The full employment curve, AD curve and AS curve
b) IS curve, LM curve and purchasing power parity
c) IS curve, LM curve and AD curve
d) IS curve, LM curve and NX curve
446 Exchange can be define as
a) Amount of one currency that must be paid in order to obtain one unit of another currency.
b) Difference between total exports and total imports within a country
c) Price at which the sales and purchases of foreign goods takes place
d) Ratio of import prices to export prices for a particular country
447Under a dirty float regime
a) The exchange rate is determined by market forces.
b) The exchange rate is unofficially controlled by the central bank
c) The exchange rate is fixed
d) The exchange rate can move between a minimum and maximum level only
448 Under flexible exchange rate, if government purchases increases
a) IS and LM curves shift rightward and output increases
b) IS and LM curves shift downward and output increases
c) IS and LM curves shift rightward and output decreases
d) IS and LM curves shift downward and output decreases
449 Under flexible exchange rate, if money supply increases
a) There would be a decrease in output
b) There would be an increase in output
c) Output remains unchanged
d) None of above
450 Under fixed exchange rate
a) Fiscal policy and Monetary policy are powerful
b) Fiscal policy and Monetary policy are powerless
c) Monetary policy is powerless and fiscal policy is powerful
d) Monetary policy is powerful and fiscal policy is powerless
451 The Mundell-Fleming model shows that effect of any economic policy on small open economy
depends upon
a) Prevailing interest rate of economy
b) Where economy exist in business cycle
c) Type of exchange rate
d) Output of economy
452 The Mundell-Fleming model shows that the power of monetary and fiscal policy to influence
aggregate demand depends
a) Exchange rate regime
b) Interest rate
c) Aggregate supply
d) None of these
453 People hesitate to lend money to people from less developed countries because of
a) Their low income level
b) Country risk
c) Exchange rate expectation
d) All of above
454 To incorporate interest-rate differentials, Mundell-Fleming model assumes that
a) Domestic interest rate is equal to world interest rate plus exchange rate
b) Domestic interest rate is equal to world interest rate plus risk premium
c) Domestic interest rate is equal to world interest rate plus interest rate of neighbor country
d) Domestic interest rate is equal to world interest rate plus deposits of the country
455 In the mundell-fleming model, risk premium is determined
a) By world interest rate
b) Domestic interest rate
c) Endogenously
d) Exogenously
456 A decrease in risk premium of a country leads to
a) An depreciate in its interest rate
b) A appreciate in its interest rate
c) An appreciate in world interest rate
d) An depreciate in world interest rate
457 The price of Levi Jeans will be equal across the UK and US under
a) Fixed exchange rate
b) Floating exchange rate
c) Perfect competition
d) Purchasing power parity
458 The accumulation of all past annual deficit is called
a) National Debt
b) Government debt
c) National loan
d) Government loan
459 The government budget deficit is equal to
a) An amount that government needed to issue new security bounds
b) An amount of past loan that government needed to finance its operations
c) An amount of new debt that government needed to finance its operations
d) An amount of loan that government needed to made payment of past debts
460 Which of the following is not a characteristic of meaningful deficit?
a) It subtracts government assets from government debt
b) Includes hidden liabilities
c) Both a and b
d) Neither a not b
461 According to the traditional view of government debt, when government introduces a tax cut
a) It results in budget surplus and appreciation in currency
b) It results in budget deficit and appreciation in currency
c) It results in budget surplus and depreciation in currency
d) It results in budget deficit and depreciation in currency
462 “Crowding out” means that
a) government budget deficit lowers interest rates and causes investment spending to rise
b) an increase in marginal tax rates lowers production
c) a government budget deficit raises interest rates and causes investment spending to fall
d) a government budget deficit raises American exports and lowers American imports
463 Whenever the government spends more than it collects through revenue, the resulting imbalance is
known as
a) Public deficit
b) Government deficit
c) Budget deficit
d) Market deficit
464 The idea that irrespective of how a government chooses to increase spending, either by debt
financing or tax financing, the outcome will be the same and demand will remain unchanged, is
popularly known as
a) Ricardian theory of equivalence
b) Ricardian theory of competitive advantage
c) Ricardian theory of stability
d) None of the above
465 Which theory assumes that consumers are myopic
a) Ricardian theory
b) Traditional theory
c) Consumer theory
d) None of these
466 The total social cost of taxes can be reduced by
a) Minimizing the tax amount
b) Maximizing the tax amount
c) Making tax rates stable
d) Maximizing them at some point of time and minimizing them otherwise
467 What could a government do to correct its current account deficit
a) Reduce the deficit on the balance of trade
b) Reduce the debt
c) Reduce the surplus on the capital account
d) Increase the volume of imports
468 which of the following refers to inventory investment
a) the equipment and structures that businesses buy to use in production
b) the new housing that people buy to live in and that landlords buy to rent out
c) those goods that businesses put aside in storage
d) purchasing of government securities
469 which of the following variable does not shifts the investment
a) the marginal product of capital
b) the exchange rate
c) the interest rate
d) tax rules
470 Other things being equal, Quantity Theory of Money states that economies is known as
a) Double the quantity of taxes, double would be the price level
b) Double the quantity of bonds, double would be the price level
c) Double the quantity of money, double would be the price level
d) None
471 Which of the following IS a function of money?
a) medium of exchange
b) store of value
c) unit of accounting
d) all of the above
472 Which of the following is a component of M-1?
a) savings deposits
b) credit card
c) checkable deposits
d) gold
473 Which of the following is a NOT component of M-2?
a) small time deposits
b) money market mutual funds
c) stocks
d) checkable deposits
474 An increase in the money supply will cause interest rates to
a) rise
b) fall
c) remain unchanged
d) None of them
475 The limitations of Gresham's law are except
a) if the total money in circulation , including, both good and bad money, exceeds the actual monetary
demand of the public.
b) If the public is prepared to accept and circulate bad money.
c) if the good money is full-bodied legal tender whose face value equals its intrinsic value.
d) None of the above
476 Which of the following is not a merit of the branch banking
a) Spreading of risk
b) Economy in reserves
c) Monopoly banking
d) Advances on merits
477 Which of the following is not an objective of portfolio management?
a) Liquidity
b) Safety
c) Profitability
d) None of the above
478 One of the sources of liabilities management theory is ---------
a) Analysis credit worthiness
b) Liquidity
c) Raising capital funds
d) None of the above
479 All are the functions of a central bank except:
a) Regulator of currency
b) Regulator of taxes
c) Advisor to the Government
d) Custodian of cash reserves of commercial banks
480 Central banks objectives to control credit are, except:
a) To stabilize the internal price level
b) To stabilize the rate of foreign exchange
c) To protect the outflow of gold
d) To protect the indirect taxation policy
481 The determinants of money supply are:
a) The required reserve ratio
b) the level of bank reserve
c) public's desire to hold currency
d) None of the above
e) a, b and c
482 The following are all examples of demand pull inflation except:
a) Lower taxes.
b) Higher unemployment benefits.
c) An increase in the interest rate.
d) An increase in net exports.
483 Cost push inflation can be caused by:
a) Higher labour costs.
b) Lower taxes.
c) An increase in private investment.
d) Higher private consumption.
484 An increase in inflation and GDP is likely to reflect __________.
a) Cost push inflation
b) Demand pull inflation
c) Rising input prices
d) Unemployment
485 A rise in inflation and a fall in GDP are likely to reflect __________.
a) Cost push inflation
b) Demand pull inflation
c) Structural unemployment
d) Frictional unemployment
486 Central bank's rate of lending to commercial banks is called
a) Interest rate
b) Money rate
c) Control rate
d) Discount rate
487 State Bank of Pakistan is run by:
a) Government of Pakistan
b) Board of governors
c) Board of Managers
d) Board of Directors
488 Every country establishes central bank to:
a) Issue notes
b) Supervise commercial banks
c) Give loans to business
d) Both a & b
489 It is not an instrument of monetary policy
a) Bank rate
b) open market operations
c) Issue notes
d) Change in reserve ratio
490 The market operation is:
a) Buying and selling govt. securities
b) Buying and selling bills of exchange
c) Buying and selling share of companies
d) Buying and selling foreign exchange
491 Public finance economists analyze effects of ____________
a) actual government taxes
b) government spending
c) aims and goals of above activities
d) none of the above
e) all of the above
492 Public expenditures on the basis of benefits are classified into ____________ types
a) four
b) three
c) five
d) two
493 There are generally ______________ types of non-developmental expenditures:
a) four
b) three
c) five
d) two
494 Which one is not the source of public debt?
a) borrowing from individuals
b) borrowing from non-bank financial institutions
c) borrowing from central bank
d) All of the above
e) none of the above
495 Following are the merits of direct taxes, except
a) create civic sense
b)discourage unequal distribution
c) cumbersome procedures
d) flexible in nature
496 Government budget can be classified into ____________ categories
a) four
b) three
c) five
d) two
497 External budget receipts are of _______________types.
a) four
b) three
c) five
d) two
498 Instruments of fiscal policy are:
a) Govt Expenditures
b) Taxes
c) Deficit financing
d) none of the above
e) all of the above
499 Which one is not the merit of bank borrowing
a. The govt does not face more inconveniences while borrowing
b. The borrowing will not have a negative effect
c. The repayment and interest has to be paid in local currency
d. double borrowing
500. A financial intermediary is a middleperson between
a. buyers and sellers.
b. husbands and wives.
c. borrowers and lenders.
d. labour unions and firms.
501 National saving (or just saving) is equal to
a. none of these answers.
b. investment + consumption expenditures.
c. private saving + public saving.
d. GDP - government purchases.
502 Which of the following statements is true?
a. Long-term bonds tend to pay less interest than short-term bonds.
b. Government bonds pay less interest than comparable corporate bonds.
c. Investment funds are riskier than single stock purchases because the performance of so
many different firms can affect the return of a mutual fund.
d. A stock index is a directory used to locate information about selected stocks.
503 If government spending exceeds tax collections,
a. there is a budget deficit.
b. public saving is positive.
c. there is a budget surplus.
d. private saving is positive.
504 If GDP = PKR 1,000 billion, consumption = PKR 600 billion, taxes = PKR 100 billion, and
government purchases = PKR 200 billion, how much is saving and investment?
a. saving = PKR 300 billion, investment = PKR 300 billion
d. None
510 If we add exports and subtract imports of a country from its GDP, we get …....
a. NNP
b. NI
c. GNP
d. None
511 Other things being equal, Quantity Theory of Money (QTM) states that ………
d. None
a. Innovations
b. Risk
c. Monopoly
513 PPP is
a. Theory that tells us that exchange rates between currencies are in equilibrium when their
purchasing power is the same in both countries.
b. GDP divided by exchange rate.
c. Measure of income inequality.
d. Measure of infant mortality in developing countries.
514 The Human Development Index (HDI) summarizes a great deal of social performance in a single
composite index, combining
a. Disparity reduction rate, human resource development rate and the composite index.
b. Longevity, education and living standard.
c. Minimum schooling, adult literacy and tertiary educational attainment.
d. Human resource training, development and R&D.
515 As economic development proceeds, income inequality tends to follow a(n) __________ curve
a. Convex.
b. Inverted U-shaped.
c. L-shaped.
d. S-Shaped.
516 According to Lewis’s model, the dual economy grows only when
a. The modern sector increases its output share relative to the traditional sector.
b. Agricultural sector uses modern equipment.
c. Agricultural sector hires labor economically.
d. Modern manufacturing sector is labor-intensive.
517 Heavy export duties on agricultural exports:
a. Raise the domestic prices
b. Lower the domestic prices
c. Do not have any impact on commodity prices
d. None of above.
518 A matrix having 1s in its principal diagonal and 0s, anywhere else is called ---
a. Identity Matrix
b. Idempotent matrix
c. Inverse Matrix
d. Null Matrix
519 -------------------------------------- is concerned with the comparison of different equilibrium states that are
associated with the different sets of values of parameters and exogenous variables.
a. Dynamic analysis
b. Comparative static analysis
c. Static analysis
d. all of above
520 Aggregate supply shocks that produce severe cost-push inflation cause:
a. Increase in employment level
b. Decrease in employment level
c. Stagflation
d. Disinflation
521 Deliberate change in government spending and tax collections to achieve socio-economic goals is
known as
a. monetary policy
b. direct control
c. Fiscal policy
d. policy rules
522 Multicolinarity is detected by using.
a. r2
b. VIF
c. Gold field Quandt test
d. Disturbance terms
523 If model is Ln Yi = B0 + B1 Ln Xi + Ui then B1 is.
e. Slope Coefficient
f. Partial Slope coefficient
g. Elasticity
h. Partial elasticity
524 The Harrod-Domar growth model suggests that growth is
a. directly related to savings and inversely related to the capital/output ratio.
b. directly related to the capital/output ratio and inversely related to savings.
c. indirectly related to savings and the capital/output ratio.
d. directly related to savings and the capital/output ratio.
525 Foreign trade
a.fewer students will take degree courses in accounting and more will take education courses.
b.fewer students will take degree courses in education and more will take accounting courses.
c.fewer students will attend university.
d.none of these answers.
527 High and persistent inflation is caused by
a. Labour
b. land
c. money
d. capital
e. All of these answers are factors of production.
530 Points on the production possibilities frontier are
a. inefficient.
b. normative.
c. unattainable.
d. efficient.
e. none of these answers.
531 . Refer to following table. Which of the following statements about absolute advantage is true?
Food Electronics
Australia 20 5
Korea 8 4
a. Australia has an absolute advantage in the production of food while Korea has an absolute advantage in
the production of electronics.
b. Korea has an absolute advantage in the production of food while Australia has an absolute advantage in
the production of electronics.
c. Australia has an absolute advantage in the production of both food and electronics.
d. Korea has an absolute advantage in the production of both food and electronics.
532 All of the following shift the supply of watches to the right except
Pens Pencils
Germany 8 4
Poland 8 2
Which of the following statements about free trade between Germany and Poland is true?
a. A + B + C + D.
b. A.
c. A + B + D.
d. A + B + C.
e. A + B.
535. If a production function exhibits diminishing marginal product, the slope of the corresponding
total-cost curve
a. electricity
b. cable television
c. cola
d. milk
e. All of these answers represent competitive markets.
538 . Refer to the following exhibit. The profit-maximizing monopolist will choose the price and
quantity represented by point
a. A.
b. B.
c. C.
d. D.
539 .
The monopolistically competitive market shown in the above exhibit will, in the long run,
a. attract new producers into the market, which will shift the demand faced by incumbent firms to the left.
b. attract new producers into the market, which will shift the demand faced by incumbent firms to the
right.
c. cause producers to exit the market, which will shift the demand faced by incumbent firms to the left.
d. cause producers to exit the market, which will shift the demand faced by incumbent firms to the right.
540 .
Refer to the above exhibit. Suppose that the consumer must choose between buying socks and belts.
Also, suppose that the consumer's income is PKR 100. Suppose that the price of a pair of socks falls
from PKR 5 to PKR 2. The substitution effect is represented by the movement from point
a. Z to point X.
b. X to point Y.
c. X to point Z.
d. Y to point X.
541. If a cobbler buys leather for PKR 100 and thread for PKR 50 and uses them to produce and sell
PKR 500 worth of shoes to consumers, the contribution to GDP is
a. PKR 50.
b. PKR 100.
c. PKR 650.
d. PKR 500.
e. PKR 600.
542. The following table contains information about an economy that produces only pens and books.
The base year is 2003.
2003 3 100 10 50
2004 3 120 12 70
2005 4 120 14 70
Refer to the above table. What is the value of the GDP deflator in 2004?
a. 119
b. 138
c. 116
d. 113
e. 100
543 If we add exports and subtract imports of a country from its GDP, we get …....
a. NNP
b. NI
c. GNP
d. None
544. When the SBP extends a discount loan to a bank,
a. It makes important decisions about the nation's tax and public spending policies
b. It is responsible for conducting the nation's monetary policy
c. It has many interactions with the nation's citizens and businesses
d. It lends only to the nation's largest and most important business firms
546 The creation of credit by commercial banks will
d. None of above
549 As economic development proceeds, income inequality tends to follow a(n) __________ curve
a. Convex.
b. Inverted U-shaped.
c. L-shaped.
d. S-Shaped.
550 Lowering the cut-score value would affect the number of eligible applicant
a. increase
b. Decrease
c. Remain same
d. Both, increase and decrease
551 If supply of labor force exceeds than the demand, the result would be
a. Recruitment
b. Selection
c. De-recruitment
d. Training and Development
552 The master goal of economic policy is to promote
a. Social welfare
b. Cultural welfare
c. General welfare
d. Both a &b
553 Removal of quantitative restrictions on international trade is expected to promote
a. Imports of agri. Commodities
b. Exports of agricultural commodities
c. Both imports and exports & production inputs
d. None of above
554 Servitude in any form reflects a state of
a. Emergency
b. Dependency
c. Underdevelopment
d. None of above
555. Which of the following could be considered critical questions in development economics?
a. Net worth
b. Equity
c. Deficit
d. Net deficit
560 When the farmer fails to repay the loan in the event of natural calamities, he is a case of
a. Willful default
b. Non-wilful default
c. Sheer willful default
d. None of above
561 An input (X2) can be defined as a technical __________ for another input (X 1) if an increase in the use
of X2 causes the marginal product of X1 to increase.
a. Complements
b. Competitive
c. Interdependence
d. Independence
562 A ___________ curve represents the range of options open to a society given the resources that are
available to the society.
a. Product transformation
b. Total physical product
c. Production elasticity
d. Indifference
563 The production possibilities curve at the firm level is called -----------------------------
a. Ridge line
b. Isocline
c. Pseudoscale line
d. Expansion path
566 ____________ is the proportional change in the output ratio divided by the proportional change in the rate
of product transformation.
a. Output elasticity
b. Output elasticity of substitution
c. Product transformation
d. Marginal substitution
567 For profit maximization, MVP curve must intersect ________ from above.
a. MFC
b. MC
c. TVP
d. MPP
568 The MC curve that lies above average variable cost is the_________________for the firm.
a. Supply curve
b. Demand curve
c. Average variable cost curve
d. Any other
569 The snapshot comparison of prices and quantities that would prevail under the old and new levels
of consumer incomes is.
a. Comparative statistics
b. Inverse price ratio
c. Slope
d. Any other
570 A Pigouvian tax is a tax that should be set equal to
a. The divergence between private and social benefits.
b. The divergence between private and social costs.
c. The marginal benefit associated with the good or service.
d. None of the above.
571. A marginal damage function represents
a. Fully recovered
b. Partially recovered
c. Both a and b
d. None
573. A Deliberate changes in government spending and tax collections to achieve socio-economic
goals is known as
a. monetary policy
b. direct controls
c. Fiscal policy
d. policy rules
574. Multicolinarity is detected by using.
a. r2
b. VIF
c. Gold field quandt test
d. Disturbance term
575 High and persistent inflation is caused by
a. Storage Cost
b. Transportation cost
c. Processing Costs
d. All of them
578 Which factor is not part of the external environment influencing consumer behavior
a. Culture
b. Social class
c. Personality
d. Family
579. Consumer decision process begins with__________
a. Information search and Evaluation
b. Problem recognition
c. Purchasing process
d. all of these
580 The process of dividing a total market into market groups so that persons within each group have
relatively similar product needs is called:
a. segmenting
b. differentiating
a. Target marketing
b. concentrating
581 Building a strategic marketing plan involves a careful assessment of the opportunities, threats &
objective evaluation of the firm’s strengths & weakness through ________ analysis
a. Economic
b. SWOT
c. MAN
d. None of these
582. Agricultural markets are inefficient when there are ____________________
a. Imperfect competition
b. Large marketing margins
c. Higher losses
d. All of these
583 Market ________________refers to the pattern of behaviour that enterprises follow in adapting
to the market in which they buy or sell.
a. Structure
b. Conduct
c. Performance
d. Function
584 McDonald's uses a segmentation strategy for its sandwiches based on characteristics such as age
and gender. It is using which group of segmentation variables?
a. Demographic
b. Psychographic
c. Geographic
d. Education
585 _______________function involves those activities that are concerned with the transfer of
ownership in marketing system
a. Exchange
b. physical
c. facilitating
d. None of these
586 _____ is the data needed by producers, wholesalers and consumers to help them make decisions.
a. Market information
b. Market research
c. Market intelligence
d. None of them
587 Tariff Duty,________________, Import Embargo and Voluntary Export Restrained are important
Anti-dumping measures.
a. Import Quota
b. Import Licenses
c. Export Subsidy
d. None of them
588 Information about the speculative demand is needed by ____________ to make decisions.
a. Government
b. Stock holders
c. Exporters
d. Importers
e. None o them
589 A dairy farm produces 100 kg milk, domestic consumption, feeding and payment in kind accounts
for 10 kg milk, another 10% of total milk is lost during transporting it to the market, so marketed
surplus will be
a. 70 kg
b. 85 kg
c. 60 kg
d. none of these
590 A middlemen who sells the services to their principal is known as
a. Commission man
b. broker
c. None of these
d. both of these
591 Points on the production possibilities frontier are
a. inefficient.
b. normative.
c. unattainable.
d. efficient.
e. none of these answers.
592 An amount recorded on the left side of an account is called……………. entry.
a. Debit
b. Credit
c. Any one
d. Any other
593 Which of the following is not covered under the category of conscious control on fertility?
a. theoretical
b. practical
c. utilitarian
d. a and c
595 In theoretical field social research aims:
a. finding problems of human being.
b. identifying delinquent behavior.
c. reducing social conflicts.
d. none of above.
596 Density of population is very much related to.
a. Climate
b. Cultural background
c. Political system
d. Form of government
597 One important cause of increase in world population is that the society?
a. Reproducibility
b. un-idimensionality
c. None of these
599. “The process of selecting the sample from the population” is called
a. Scale
b. Sampling
c. Standard error
d. Statistics