Lecturer Economics MCQs[1]

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(Lecturer Economics Exam 2011)

(Economics General MCQs)

Ref: David Begg, University of London SET-I Q.1 Q.1: Econ Econo omics mics is the stu study of A) production technology B) consumption decisions C) how how soc socie iety ty deci decide des s wha what, t, how, how, and and for for whom whom to prod produc uce e D) the best way to run society Q.2: Q.2: A resou resource rce is scarc scarce e if supply supply exceed exceeds s demand demand at zero zero price price:: A) True B) False Q.3: Q.3: The The opp oppor ortu tuni nity ty cost cost of a goo good d is is A) the time lost in finding it B) the the qua quant ntity ity of othe otherr goo goods ds sacri sacrifi fice ced d to to get get anoth another er unit unit of that that goo good d C) the expenditure on the good D) the lo loss of of in interest in in us using sa savings Q.4: Q.4: A mar market ket can can acc accur urat ately ely be desc descri ribe bed d as: as: A) a place to buy things B) a place to sell things C) the the proc proces ess s by whi which ch pri price ces s adju adjust st to to reco reconci ncile le the the allo allocat catio ion n of reso resour urces ces D) a pl place wh where bu buyers an and se sellers me meet Q.5: Q.5: A comman command d econo economy my deci decides des reso resourc urce e alloca allocatio tion n by gove governm rnment ent plannin planning g A) True B) False Q.6: Q.6: In a free free mar marke kett ____ ______ ____ __ ___ _____ ____ ____ ___ _ A) governments intervene B) governmen ments plan production ion C) governments in interfere D) pric prices es adju adjust st to reco reconc ncil ile e scar scarci city ty and and desi desire res s Q.7: In the mix mixed economy A) econ econom omic ic pro probl blem ems s are are solv solved ed by the the gove govern rnme ment nt and and mark market et B) econ econom omic ic deci decisi sion ons s are are made made by by the the priv privat ate e sect sector or and free free marke markett C) econ econom omic ic allo alloca cati tion on is achi achiev eved ed by the the inv invis isib ible le hand hand D) econ econom omic ic que quest stio ions ns are are sol solve ved d by the the gov gover ernm nmen entt depa depart rtme ment nts s Q.8: Q.8: Positi Positive ve econo economics mics stud studies ies obje objectiv ctive e explan explanatio ations ns of the the workin workings gs of the the econom economy y A) True B) False Q.9: Q.9: Normati Normative ve econom economics ics forms forms ______ _________ ___ based based on _______ __________ _____ __ A) positive statemen ments, facts B) opinions, personal values C) positive statemen ments, values D) opinions, facts Q.10: Q.10: Microec Microecono onomics mics is concer concerned ned with with A) the econom y as a whole B) the electronics industry C) the stud study y of of ind indiv ivid idua uall eco econo nomi mic c beh behav avio iorr D) the inte intera rac ction tions s wit withi hin n the the ent entire ire ec econom onomy y Q.11: Q.11: Macroe Macroecon conomics omics is the the study study of ______ _________ ______ ______ ___ A) indi indivi vidu dua al buil buildi ding ng bloc blocks ks in the econ econom omy y B) the the rel relat atio ions nshi hip p betw betwee een n dif diffe fere rent nt sect sector ors s of the the eco econo nomy my C) household purchase decision ions D) the econom y as a whole Q.12: Q.12: An economi economic c model model is physica physicall represe representa ntatio tion n of an economy economy A) True B) False Q.13: Data are important important in economics economics because because ___________ ___________ and ________ ___________ ___ A) they they sug sugge gest st relat relatio ions nship hips s for for exp expla lana nati tion, on, allo allow w test testing ing of hyp hypot othe hesi sis s B) they hey ca can be be use used d for for table ables, s, they hey can can be graph raphed ed C) they they can can be be use used d in in com compu pute ters rs,, gov gover ernm nmen ents ts use use the them m

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D) they they prov provid ide e inte intere rest stin ing g info inform rmat atio ion, n, can can be be summa summari rize zed d Time Time Serie Series s Data Data show show inform informat atio ion n A) abou aboutt the the same same poin pointt in time time over over diff differ eren entt plac places es B) abou aboutt dif diffe fere rent nt poin points ts in time time over over the the same same vari variab able le C) abou aboutt diff differ eren entt vari variab able les s over over diff differ eren entt plac places es D) abou aboutt dif diffe fere rent nt poin points ts in time time over over diff differ eren entt pla place ces s Index numbers express express base base data data in relation relation to some relative relative value A) True B) False The reta retailil price price index index is is used used to _____ ________ ______ _______ ____ A) construct price index B) compare shop prices C) mea measure ch changes in in th the cos costt of of liv livin ing g D) none of the above A real real valu value e can be deri derived ved from from a nomina nominall value value by A) adjusting for ch changes over titime B) adjus justing fo for da data co colle llection er errors C) adjus justing for population ion chang anges D) adjusting fo for ch changes in in pr price ices To find the the percenta percentage ge change change in a number, number, divide the the absolute absolute change change by the original original number and multiply by 100 A) True B) False If your your income during during one year year is £10,000 £10,000 and the following following year year it is £12,000, £12,000, then then it has grown by A) 20% B) 2% C) 12% D) 16% A straight straight line diagram diagram can can be drawn drawn knowing knowing the ________ ___________ ___ and and ____________ _____________ _ A) vertical axis and horizontal axis B) intercept and slope C) scale and slope D) intercept and scale On a grap graph, h, a positiv positive e linear linear rela relatio tionsh nship ip A) moves down to the right B) moves up to the left C) moves up to the right D) moves down to the left If the diagram diagram of a line shows shows that that lower lower values on the vertic vertical al scale are are associated associated with with higher higher values on the horizontal scale, this is an example of ______________ A) a nonlinear rel at ationship B) a po positive lilinear rel rela ationship C) a scatter diagram D) a ne negative lilinear ear re relationship When we know know the quantity quantity of of a product product that that buyers buyers wish to purchase purchase at each each possible possible price, price, we know A) Demand B) Supply C) Excess Dem and D) Excess Suppl y Supply is is the quanti quantity ty of a good sellers sellers wish to to sell each each time time the market market opens A) True B) False The equilibri equilibrium um price clears clears the market; market; it is the price price at which which __________ ______________ ____ _________ _____________ ____ A) Everything is sold B) Buyers sp spend all th their money

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D) they they prov provid ide e inte intere rest stin ing g info inform rmat atio ion, n, can can be be summa summari rize zed d Time Time Serie Series s Data Data show show inform informat atio ion n A) abou aboutt the the same same poin pointt in time time over over diff differ eren entt plac places es B) abou aboutt dif diffe fere rent nt poin points ts in time time over over the the same same vari variab able le C) abou aboutt diff differ eren entt vari variab able les s over over diff differ eren entt plac places es D) abou aboutt dif diffe fere rent nt poin points ts in time time over over diff differ eren entt pla place ces s Index numbers express express base base data data in relation relation to some relative relative value A) True B) False The reta retailil price price index index is is used used to _____ ________ ______ _______ ____ A) construct price index B) compare shop prices C) mea measure ch changes in in th the cos costt of of liv livin ing g D) none of the above A real real valu value e can be deri derived ved from from a nomina nominall value value by A) adjusting for ch changes over titime B) adjus justing fo for da data co colle llection er errors C) adjus justing for population ion chang anges D) adjusting fo for ch changes in in pr price ices To find the the percenta percentage ge change change in a number, number, divide the the absolute absolute change change by the original original number and multiply by 100 A) True B) False If your your income during during one year year is £10,000 £10,000 and the following following year year it is £12,000, £12,000, then then it has grown by A) 20% B) 2% C) 12% D) 16% A straight straight line diagram diagram can can be drawn drawn knowing knowing the ________ ___________ ___ and and ____________ _____________ _ A) vertical axis and horizontal axis B) intercept and slope C) scale and slope D) intercept and scale On a grap graph, h, a positiv positive e linear linear rela relatio tionsh nship ip A) moves down to the right B) moves up to the left C) moves up to the right D) moves down to the left If the diagram diagram of a line shows shows that that lower lower values on the vertic vertical al scale are are associated associated with with higher higher values on the horizontal scale, this is an example of ______________ A) a nonlinear rel at ationship B) a po positive lilinear rel rela ationship C) a scatter diagram D) a ne negative lilinear ear re relationship When we know know the quantity quantity of of a product product that that buyers buyers wish to purchase purchase at each each possible possible price, price, we know A) Demand B) Supply C) Excess Dem and D) Excess Suppl y Supply is is the quanti quantity ty of a good sellers sellers wish to to sell each each time time the market market opens A) True B) False The equilibri equilibrium um price clears clears the market; market; it is the price price at which which __________ ______________ ____ _________ _____________ ____ A) Everything is sold B) Buyers sp spend all th their money

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C) Qua Quantit ntity y dem deman ande ded d eq equals uals quan quanti titty sup suppl plie ied d D) Excess dem and is zero E) c and d When When a marke markett is in equ equili ilibri brium um A) Qua Quantit ntity y dem deman ande ded d eq equals uals quan quanti titty sup suppl plie ied d B) Exce Excess ss deman emand d and and exce exces ss supp supply ly are are zer zero C) The The mar mark ket is clea clearred by the equi equili libr briu ium m pric price e D) All of the above ___________ ______________ ___ and ____________ ____________ do not directly directly affect affect the demand demand curve A) the pric price e of of re relate lated d go goods, ods, cons consum ume er inc incom omes es B) consumer incomes, tastes C) the cos costs of prod produc ucti tion on,, ban bank k ope openi ning ng hou hours D) the pric price e of of rela relate ted d go goods, ods, pref prefer eren ence ces s A chang change e in price price can can cause cause a shift shift of a deman demand d curve curve A) True B) False A deman demand d curve curve can can shif shiftt becaus because e of changin changing g A) incomes B) prices of related goods C) tastes D) all of the above A supp supply ly curv curve e is is dire directly ctly affect affected ed by A) technology B) input costs C) government regulation D) all of the above An increase increase in price price will cause a supply supply curve curve to shift to the the left left A) True B) False If a price price increase increase of a good A increas increases es the quantity quantity demande demanded d of good good B, the good B is is a A) substitute good B) complementary go good C) bargain D) inferior good An increase increase in consumer consumer income income will increa increase se demand for a ____________ ____________ but decreas decrease e demand for a ____________ A) substitute go good, in inferior go good B) normal good, inferior good C) inferior good, norm al al go good D) normal mal go good, co complementary go good Price ceilings ceilings are impose imposed d increase increase price price above above the free market market equilibr equilibrium ium price price A) True B) False

ANSWERS:Q. 1 C Q. 5 A Q. 9 B Q.13 A Q.17 D Q.21 C Q.25 E Q.29 D Q.33 B

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22 Q.26 Q.30 Q.34

B D C B A D D D B

Q. 3 Q. 7 Q . 11 Q. 1 5 Q. 1 9 Q. 2 3 Q. 2 7 Q. 3 1

B A D B A A C B

Q.4 Q.8 Q.12 Q.16 Q.20 Q.24 Q.28 Q.32

C A B C C B B A

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SET-II The price elasticity of demand measures _____________ A) the responsiveness of quantity demanded to a change in price B) how far a demand curve shifts C) a change in price D) a change in quantity demanded If demand is ____________ the price cuts will __________ spending A) inelastic, increase B) elastic, increase C) elastic, decrease D) none of the above The cross-price elasticity of demand measures how the quantity demanded of one good is related to consumer income. A) True B) False Positive cross-elasticities suggest that goods are _______ and negative cross-elasticities that good are _____________ A) substitutes, inferior B) normal, complements C) substitutes, com plements D) normal, inferior A measurement showing how quantity demanded varies with income is the A) price elasticity of demand B) cross-price elasticity of demand C) budget elasticity of demand D) income elasticity of demand Inferior goods have _________ and luxury goods have __________ A) negative income elasticities, income elasticities greater than 1 B) income elasticities greater than 1, negative income elasticities C) positive income elasticities, negative income elasticities D) none of the above In your income doubles and the prices of the goods your buy double, then your demand for these goods will likely __________ A) increase B) not change C) decrease D) shift Any price change can be decomposed into an income effect and a complementary effect A) True B) False The income effect of a price increase of a normal good is to ___________ of that and the substitution effect is to __________ of that good. A) increase quantity demanded, reduce quantity demanded B) increase quantity demanded, increase quantity demanded C) reduce quantity demanded, reduce quantity demanded D) reduce quantity demanded, increase quantity demanded The opportunity cost of a student is: A) Course fees and rent B) A loan from the bank C) What the student could have earned in the best job available by not studying D) What the student will earn after graduation Economics assumes that people consume goods and services to achieve A) Status B) Prestige C) Utitlity D) Self-esteem The extra utility from consuming one ore unit of a good is called

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A) Marginal Utility B) Additional Utility C) Surplus Utility D) Bonus Utility Adding up the quantities demanded of a good by different people facing the same price gives us the A) Supply curve B) Market Demand Curve C) Demand Curve D) Market supply curve Firms are assumed to ____________ costs and to _________ profits A) incur, desire B) pay, make C) charge, earn D) minimize, maximize The increase in total cost when one more unit is produced is known as A) marginal cost B) opportunity cost C) limited cost D) average cost Marginal revenue is the ____________ when output is _____________ A) change in average revenue, incrased B) change in total revenue, increased by one unit C) change in average revenue, increased by one unit D) change in total revenue, increased Profits are maximized when ___________ A) Costs are minimized B) Revenue is maximized C) average cost is less than average revenue D) marginal cost equals marginal revenue If a firm is producing a level of output where marginal cost is greater than marginal revenue, it should increase output to maximize profits A) True B) False If a firm’s wage costs increase this will cause _________ and __________ A) marginal cost to increase, output to fall B) marginal revenue to increase, output to fall C) opportunity cost to increase, the firm will close D) average cost will rise, output will increase An upward shift in marginal cost _______ output and an upward shift in marginal revenue _________ output A) reduces, reduces B) reduces, increases C) increases, increases D) increases, reduces A firm should close down if profits are zero A) True B) False A firm that breaks even after all economic costs are paid is earning A) Economic Profit B) Accounting Profit C) Normal Profit D) Supernormal Profit A firm that makes profit in addition to normal profit is making A) Economic Profit B) Accounting Profit C) Normal Profit

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D) Supernormal Profit If both marginal cost and marginal revenue increase, a firm ________ A) should increase output B) should reduce output C) will require further information on how to respond D) shoud not change output

ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17 Q.21

A D C B D B

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22

B A C D B C

Q.3 Q.7 Q.11 Q.15 Q.19 Q.23

B B C A A D

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C B A B B C

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SET-III A production technique is technically efficient if A) output is maximized B) inputs are minimized C) there is no way to make a given output using less of one input and no more of the other Inputs D) costs are minimized A period of time long enough for the firm to adjust all production inputs is described as the long run A) True B) False Decreasing returns to scale means that ___________ as _____________ A) short run marginal costs rises, output rises B) long run marginal cost rises, output rises C) short run average cost rises, output rises D) long run average cost rises, output rises If a long run average cost curve is falling from left to right this is an example of A) increasing returns to scale B) decreasing returns to scale C) constant returns to scale D) the minimum efficient scale If a firm is not operating at the output necessary to achieve all scale economies, it has not achieved its A) Efficient Scale B) Average Efficient Scale C) Maximum Efficient Scale D) Minimum Efficient Scale When average costs is falling marginal cost is _____________ and when average cost is rising marginal cost is ___________ A) greater than average cost, greater than average cost B) less than average cost, greater than average cost C) less than average cost, less than average cost D) greater than average cost, less than average cost The firms long run output decision will be where A) long run average cost is lowest B) marginal revenue equals output C) marginal revenue equals long run marginal cost D) marginal cost equals output Short run average total costs are equal to the sum of __________ and _________ A) short run opportunity costs, profit B) short run variable costs, profit C) short run average variable costs, profit D) short run average variable costs, short run average fixed costs The short run marginal cost curves cuts the short run total cost curve and short run average cost curve __________________ A) At their lowest points B) when they are declining C) when they are increasing D) when marginal revenue is zero Given a long run average cost curve, every point represents a tangency with the lowest point of a short run average cost curve for a fixed plant size A) True B) False Holding all factors constant except one and increasing a variable factor is expected to lead to steadily decreasing marginal product of that factor. This is an example of A) decreasing returns to scale B) the law of diminishing returns

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C) constant returns to scale D) an inefficient production technique In the short run a firm will produce zero output if___________ A) Price is greater than short run average total cost B) price is between short run average total cost and short run average variable cost C) price is less than short run average variable cost D) profit is zero In a competitive industry each buyer and seller _________________ A) Is a price taker B) produce different products C) Believes that can influence price D) Prevents the entry of competitors For a competitive firm, its short run supply curve is _________ and its long run supply curve is ___________ A) SMC, LMC B) SMC above SAVC, LMC above LAC C) SMC below SAVC, LMC above LAC D) SMC below SAVC, LMC below LAC For perfect competition to work there must be A) many buyers and sellers B) a standard product C) free entry and exit D) perfect information E) all of the above If there are short run excess profits in a competitive industry, in the long run they will disappear because of new entrants. A) True B) False A competitive firm deman curve is A) horizontal B) vertical C) downward sloping D) fairly elastic A competitive firm produces a level of output at which___________ A) price is greater than marginal cost B) price equals m arginal cost C) price is less than marginal cost D) none of the above

ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17

C D A A A

Q.2 Q.6 Q.10 Q.14 Q.18

A B B B B

Q.3 Q.7 Q.11 Q.15

D C B E

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A D C A

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SET-IV The supply rule of the profit maximizing monopolist is different from that of a competitive firm. A) True B) False Comparing a monopoly and a competitive firm, the monopolist will _____________ A) produce less at a lower price B) produce more at a lower price C) produce less at a higher price D) produce less at a lower price A discriminating monopolist will charge a higher price to groups with elastic demand A) True B) False Perfect price discrimination means that every customer ___________ A) buys the same amount B) pays the same price C) contributes the same revenue D) pays what she thinks the product is worth A monopoly may be self-perpetuating because profits may be used for A) research B) cost-saving C) technical advance D) all of the above All of the following are types of imperfect competition except A) monopolistic competition B) oligopoly C) monopoly D) unfair competition A natural monopoly has a declining _________ over a large range of output A) long run marginal cost B) short run marginal cost C) long run average cost D) long run marginal cost When a market is contestable, incurmbent 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 The long run equilibrium in monopolistic competition involves competitors making excess profits A) True B) False The reason for the kinked demand cureve is that A) the oligopolist believes that competitors will match output increases but not output reductions B) the oligopolist believes that competitors will match price increases but not output reductions C) the oligopolist believes that competitors will match price cuts but not price rises D) the oligopolist believes that competitors will match price increases but not output incrases Game theory studies interdependent decision-making A) True B) False The Prisoners’ Dilemma Game demonstrates that A) players are better off to act independently B) monopoly is better than competition C) people will always cheat D) players are better off if they co-operate In Nash Equilibrium each player chooses the best strategy __________

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A) assuming other players move first B) dominated by the other players C) given the strategies of other players D) that is a credible threat A dominant strategy is ____________ A) a winning strategy B) a losing strategy C) a players best strategy when moving first D) a player’s best strategy whatever the strategies adopted by rivals Strategic entry barriers are made by nature A) True B) False

ANSWERS:Q.1 Q.5 Q.9 Q.13

B D B C

Q.2 Q.6 Q.10 Q.14

C D C D

Q.3 Q.7 Q.11 Q.15

B C A B

Q.4 Q.8 Q.12

D A D

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SET-V The substitution effect of a rise in the price of labour will _________ the quantity of labour and the output effect will ______________ it. A) increase, increase B) increase, reduce C) reduce, reduce D) reduce, increase As more labour is used the marginal physical product of labour increases A) True B) False A profit-maximizing firm will hire labour until _________ equals the __________ A) marginal revenue, marginal cost B) long run marginal revenue, long run marginal cost C) labour output ratio, capital output ratio D) marginal cost of labour, marginal revenue product The downward sloping marginal physical product of labour is the firm’s ___________ A) supply of labour B) short-run demand curve for labour C) marginal cost of labour D) marginal revenue product of labour When we say that labour demand is a derived demand, we are referring to government initiatives to increase employment A) True B) False The participation rate in the labour force is affected by A) higher real wages B) lower fixed costs of working C) lower non-labour income D) changes in tastes between leisure and work E) all of the above Top footballers tend to earn more than lecturers because A) footballers give more entertainment B) lecuterers are lazy C) the labour markets are imperfect D) top footballers are relatively scarce in relation to lecturers Human capital can be described as A) the tools used by workers to enhance productivity B) a persons inherited abilities C) the stock of expertise accumulated by a worker D) education The supply of highly educated workers is fixed in long run A) True B) False The most important source of wage differentials are A) regional variation B) unionization C) relative danger D) skills Skilled labouris relatively scarce because A) there are too few teachers B) too few student places in higher education C) it is costly to acquire human capital D) teachers’ salaries are too low The opportunity cost of acquiring education is __________ A) course fees B) course fees and living expenses C) the earnings forgone

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D) course fees, living expenses and textbooks By restricting labour supply a trade union can ___________ and ___________ A) increase the wage, increase employment B) maintain the wage, increase employment C) increase the wage, lower employment D) maintain the wage, lower empoyent In the UK under a ____________ of the labour force belong to a trade union. A) quarter B) third C) half D) three-quarters Unions achieve a higher wage differential the more _______________ and the more _________ A) inelastic the demand for labour, they can restrict the supply of labour B) members they have, aggressive they behave C) the economy is growing, people prefer leisure D) the productivity is growing, vacancies exist A closed shop is a union that has no room for additional members A) True B) False Women and non-whites on average receive lower incomes than white men because A) they tend to work in relatively unskilled jobs B) educational disadvantage C) firms are reluctant to invest in training D) all of the above In the UK, in recent years, union membership has ___________ and days of work lost because of strikes has_____________ A) grown, declined B) declined, declined C) declined, grown D) grown, grown Involuntary unemployment exists if workers A) will not work at the offered wage B) would work at the going wage but cant find jobs C) will not work because the hours are anti-social D) are not prepared to move house to get the job Efficiency wage are ____________ that rise ____________ A) low wages, employment B) high wages, labour suppl y C) high wages, productivity D) high wages, employment The difference between gross investment and net investment is A) depreciation of the existing capital stock B) productive investment C) dwellings D) inventories The cost of using capital services is the ___________ A) wage rate of capital B) interest charges C) marginal capital cost D) rental rate for capital The value of an asset depends upon A) its scrap value B) its depreciation C) the present value of the future stream of income it can earn D) the cost of loans The marginal revenue product of capital is the ______________ A) change in company’s balance sheet when it acquires new plant

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B) additional value of output from using more capital C) change in a company’s share price D) changing value of the capital stock The demand for capital services is derived from a falling MRPK schedule A) True B) False In the short run, the supply of capital is __________ and in the long run will depend on __________ A) variable, technology B) fixed, expectations C) fixed, rental rate of capital D) variable, interest rates If workers get a real wage increase this will likely ___________ and ____________ A) encourage the use of more capital in the long run, reduce demand for all inputs B) encourage the use of more capital, increase demand for all inputs C) encourage the use of less capital, reduce demand for all inputs D) encourage the use of less capital, reduce demand for all inputs The supply of land is normally greater in the long run than in the short run. A) True B) False Land will be allocated between competing uses so that ________________ A) hoursing gets priority B) industry gets priority C) farming gets priority D) the equilibrium rental rate equilibrates total demand with supply Different capital intensity in different industries is mainly explained by __________ and ________ A) wage differentials, skill levels B) technology, the ease of factor substitution C) government grants, international competition D) patents, skill shortages The functional distribution of income shown how national income is divided between A) employees B) the population C) the factors of production D) the working population A major cause of income inequality in European countries is trade union power A) True B) False The transfer earnings of a factor are the payments received in excess of its opportunity cost. A) True B) False

ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17 Q.21 Q.25 Q.29 Q.33

C B B C D A B D B

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22 Q.26 Q.30

B E D B B D C B

Q.3 Q.7 Q.11 Q.15 Q.19 Q.23 Q.27 Q.31

D D C A B C C C

Q.4 Q.8 Q.12 Q.16 Q.20 Q.24 Q.28 Q.32

B C C B C B B B

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SET-VI In the insurance industry, high-risk customers are more likely to take out insurance. This is an example of A) moral hazard B) risk aversion C) adverse selection D) a poor gamble Q.2: Moral hazard means that the act of insuring ________________ that the desired outcome will occur A) reduces the likelihood B) increases the likelihood C) guarantees D) none of the above Q.3: An allocation ins Pareto-efficient in no reallocation of resources would make some people __________ without making others _____________ A) worse off, worse off B) better off, better off C) better off, worse off D) equal, unequal Q.4: A competitive equilibrium is Pareto-efficient A) True B) False Q.5: We cannot say whether one allocation of resources is better than another allocation because A) some people cant count B) some people may not be permanent residents C) not all economic activity is legal D) we cant make value judgeements to compare different people’s welfare Q.6: A competitive equilibrium is Pareto-efficient because A) producers are price takers B) consumers and producers face the same prices C) marginal costs and benefits are equal D) prices equal marginal cost and benefit E) all of the above Q.7: The allocation of resources is not efficient if _____________ A) the marginal cost of production does not equal society’s marginal benefit B) the distribution is inequitable C) economic growth is low D) unemployment is high Q.8: If my neighbor burns garden waste causing my house to fill with smoke this is an example of ___ A) a production externality B) a second-best solution C) transaction costs D) a consumption externality Q.9: Externalities arise because there is a divergence between ____________ and ____________ A) private costs, private benefits B) private costs, social costs or benefits C) social costs, social benefit D) insiders, outsiders Q.10: Market failure may arise because of A) imperfect competition B) taxation C) externalities D) missing markets E) all of the above Q.11: Markets sometimes fail to exist because of A) externalities B) the free-rider problem

Q.1:

15



C) poor transport D) a and b E) a and c Q.12: A good example of a public good is _________________ A) public transport B) the national health service C) national defence D) rail transport Q.13: If the consumption of a good by one person does not reduce the quantity available by others and nobody can be easily excluded from consumption, we are referring to a A) private good B) merit good C) public good D) abundant good Q.14: Satellite television subscription and television detection devices are ways in which broadcasting companies address the _____________ problem. A) externality B) market imperfection C) deadweight burden D) free-rider Q.15: Taxes to offset externalities are distortionary A) True B) False Q.16: Except for taxes to offset __________________, taxes are ____________ A) imperfect competition, popular B) externalities, distortionary C) inequality, a first best option D) poor health, unnecessary Q.17: Taxes creat a wedge between the sales price and purchase price that prevents the price system equating ________________ and _________________ A) marginal costs, marginal benefits B) demand, supply C) marginal cost, marginal revenue D) marginal cost, average cost Q.18: The effect of a tax to offset a negative externality will be to ______________ price and ___________ quantity A) reduce, reduce B) increase, increase C) increase, reduce D) reduce, increase Q.19: The social costs of monopoly power arises because _____________ A) marginal cost is set equal to marginal revenue B) price is less than marginal cost C) marginal consumer benefit is less than marginal revenue D) there is too little output at too high a cost Q.20: The problem posed by a natural monopoly is that it faces a ________________. This means that _____________ A) increasing average cost curve, marginal cost lies above average cost B) increasing average cost curve, marginal cost lies below average cost C) decreasing average cost curve, marginal cost lies above average cost D) decreasing average cost curve, marginal cost lies below average cost ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17

C D B C A

Q.2 Q.6 Q.10 Q.14 Q.18

B E E D C

Q.3 Q.7 Q.11 Q.15 Q.19

C A D B D

Q.4 Q.8 Q.12 Q.16 Q.20

A D C B D

16


Q.1:

Q.2:

Q.3: Q.4:

Q.5:

Q.6:

Q.7:

Q.8: Q.9:

Q.10:

Q.11:

Q.12:


SET-VII The key issues of macroeconomics are A) unemployment B) inflation C) economic growth D) all of the above In an company, measuring (1) total value added, (2) total sending on final goods and (3) total factor earnings gives the result that A) 3>2>1 B 3=2=1 C) 3<2<1 D) any measure can be larger or smaller than any other In the circular flow of income, saving is an injection and investment is a leakage A) True B) False In the economy when a steel producer sells steel to car producer, it is regarded as ___________ A) a final good B) an intermediate good C) an injection D) a leakage Leakages from the circular flow are _____________, _________ and ___________ A) investment, saving, government expenditure B) savings, taxes net of subsidies, imports C) consumption, investment, government expenditure D) taxes, exports, transfer payments Injections into the circular flow are ____________, ___________ and __________ A) consumption, investment, exports B) investement, exports, transfer payments C) investments, government expenditures, exports D) taxes, exports, transfer payments In the circular flow we would expect leakages to ______________ injections. A) equal B) be less than C) be greater than D) be less or greater than Gross National Product adjusts GDP for net property income from abroad A) True B) False Nominal GNP measure income _____________ A) At the present time B) Corrected for tax changes C) Corrected for changes in interest rates D) At current prices Real GNP measure income __________________ A) including non-market activities B) adjusted for inflation C) including externalities D) including tax evasion Real GNP is a crude measure of national welfare because it excludes A) consumption B) investment C) exports D) work in the home When we refer to the hidden economy we mean unrecorded income owing to ________ A) tax evasion B) poor statistics C) the lags between statistical collection and publication

17


Q.13:

Q.14: Q.15:

Q.16:

Q.17:

Q.18: Q.19:

Q.20:

Q.21:

Q.22:

Q.23:

Q.24:


D) smugging In a macroeconomic model without foreign trade or a government, aggregate demand is the sum of A) personal savings and private investment B) personal savings and personal consumption C) personal consumption and private investment D) none of the above The sum of the MPS and MPC is 1 A) True B) False A linear consumption function with a positive slope less than one means that if income increases, consumption will A) fall B) not change C) fluctuate D) increase Short-run equilibrium output means that aggregate demand ___________ actual ouptu A) is less than B) equals C) is greater than D) fluctuates around If desired spending in the economy exceeds income we would expect_______________ A) households to save more B) firms to produce less C) firms to produce more D) the MPC to change In equilibrium savings exceed investment A) True B) False When investment is assumed to autonomous the slope of the AD schedule is determined by the ______________ A) marginal propensity to invest B) disposable incomes C) marginal propensity to consume D) average propensity to consume The multiplier tells us how much _____________ changes after a shift in ______________ A) consumption, income B) investment, output C) savings, investement D) output, aggregate demand The multiplier is calculated as A) 1/(1-MPC) B) 1/MPS C) 1/MPC D) a or b If the MPC is 0.5, the multiplier is ___________ A) 2 B) ½ C) 0.2 D) 20 If as a result of households’ wish to save more, there is a change in equilibrium income and no change in equilibrium saving, this is an example of ___________ A) market imperfection B) the law of diminishing returns C) the paradox of thrift D) market failure Aggregate demand without a foreign sector is the sum of ______ A) C+I B) C+G

18


Q.25:

Q.26:

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Q.28: Q.29:

Q.30:

Q.31:

Q.32: Q.33:

Q.1 Q.5 Q.9 Q.13 Q.17 Q.21 Q.25 Q.29 Q.33


C) I+G D) C+I+G If the government increases spending and raises taxes by just enough to finance this increase it will _____________ A) leave output unchanged B) increase output C) reduce output D) increase the MPC Startin from a balanced budget, for a given tax rate, an increase in income will cause the government budget to A) move into surplus B) move into deficit C) remain unchanged d) changed For given government spending and taxation, the government budget deficit wil grow in _________ and decline in ___________ A) booms, booms B) recessions, recessions C) booms, recessions D) recessions, booms The government budget is a good indicator of fiscal stance A) True B) False Aggregate demand is an economy trading internationally with a government sector can be written as _______________ A) AD = C + I B) AD = C + I + G C) AD = C + I + G + X + Z D) AD + C + I + G + X – Z The total multiplier for the economy will reflect _____________ A) MPC and MPT B) MPT and MPZ C) MPC and MPZ D) MPC, MPT and MPZ When the level of income _________ there wil be a tendency for the trade balance to improve as imports ___________ A) increases, increases B) falls, increase C) falls, fall D) increase, fall When an open economy is in equilibrium it means that the trade deficit is zero. A) True B) False In an open economy leakages to imports ___________ the value of the multiplier A) reduce B) increase C) do not change D) change D Q.2 B Q.3 B Q.4 B B Q.6 C Q.7 A Q.8 A D Q.10 B Q.11 D Q.12 A C Q.14 A Q.15 D Q.16 B C Q.18 B Q.19 C Q.20 D D Q.22 A Q.23 C Q.24 D B Q.26 A Q.27 D Q.28 B D Q.30 D Q.31 C Q.32 B A

19



SET-VIII Money has 3 main functions, they are, ________, ________ and ________ A) IOU, inflation hedge, store of value B) Medium of exchange, inflation hedge, store of value C) Medium of exchange, unit of account, IOU D) Medium of exchange, unit of account, store of value Q.2: The primary function of a bank is to A) Control the money supply B) Provide notes and coins for trade C) make a profit D) Provide a cheque clearing system Q.3: Banks create money by A) printing it B) issuing debits cards C) accepting cheques D) lending out part of their deposits Q.4: The size of money multiplier is determined by the marginal propensity to consume A) True B) False Q.5: The money supply is ____________ A) State Bank of Pakistan’s Issue Department B) money + bank cards + credit cards C) cheques + money + bank cards + credit cards D) Currency in circulation plus bank deposits Q.6: If banks and the private sector decide to hold less cash the money multiplier will be _________ A) unchanged B) larger C) smaller D) unstable Q.7: Three variables affect the demand for money; they are __________, ____________ and ______ A) bank opening hours, the proportion of weekly paid employees, interest rates B) the price level, interest rates, real income C) the time of year, bank opening hours, the price level D) the proportion of weekly paid employees, the time of year, real income Q.8: If I keep some money available in case I see a bargain, this is an example of ________ A) asset demand for money B) transactions demand for money C) token demand for money D) precautionary demand for money Q.9: An increase in the price level will likely increase the demand for nominal money A) True B) False Q.10: When interest rate rise, other things equal, we can expect the quantity of real mone holidings to _______ A) fall B) increase C) not change D) fluctuate Q.11: When real income increases, other things equal, we can expect the quantity of real money holdings to ________________ A) fall B) not change C) increase D) fluctuate Q.12: M4 is a ____________ measure of money and includes deposits at both ______ and _________ A) narrow, banks, building socities B) wide, banks, insurance companies

Q.1:

20


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Q.14:

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Q.16:

Q.17:

Q.18:

Q.19:

Q.20:


C) narrow, banks, insurance companies D) wide, banks, building socities The monetary base is ___________ and ___________ A) bank deposits, building society deposits B) currency in circulation, banks’ cash reserves C) retail sight deposits, building society deposits D) retail deposits, wholesale deposits If the central bank buys financial securities in the open market to increase the monetary base, this is an example of __________ A) lender of last resort B) financial interm ediation C) open market operations D) financial regulation Equilibrium in the money market will change if there is A) a change in the real money supply B) a change in real income C) a change in corruption in the banking industry D) any of the above The money supply is controlled by using open market operations to determine the money multiplier and by using reserve requirements and the discount rate to determined the monetary base A) True B) False Central banks prefer to fix the __________ and accept the resulting __________ A) demand for money, interest rate B) interest rate, equilibrium money supply C) demand for money, equilibrium money supply D) interest rate, demand for money One of the transmission mechanisms of monetary policy is through consumer demand. When interest rates ____________ household wealth _________ and consumption __________ A) rise, increases, increases B) rise, falls, increases C) rise, increases, falls D) rise, falls, falls A reduction in interest rates, causes an increase in the monetary base that results in an _________ in the availability of consumer credit and a ___________ in the cost of consumer credit. A) reduction, increase B) reduction, reduction C) increase, reduction D) increase, increase A fall in investment demand can result from A) higher interest rate B) lower expected future profits C) more expensive capital goods D) all of the above

ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17

D D A B B

Q.2 Q.6 Q.10 Q.14 Q.18

C B A C D

Q.3 Q.7 Q.11 Q.15 Q.19

D B C D C

Q.4 Q.8 Q.12 Q.16 Q.20

B D D B D

21


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SET-IX All of the following are types of monetary policy except A) a nominal m oney stock target B) a balanced budget C) an inflation target D) the pursuit of a target real interest rate An increase in government spending will stimulate private spending by causing a reduction in interest rates A) True B) False The classical model of macroeconomics assumes A) wages and prices are sticky B) wages and prices are flexible C) the economy may operate below full capacity D) the economy is always at full capacity E) a and c F) b and d The AD schedule indicates that __________ inflation is associated with _______ output A) higher, lower B) higher, higher C) lower, lower D) zero, zero In the classical model tha AS schedule is vertical A) True B) False If a person thinks they are better of after a 10% wage increase, and all prices have risen 10%, then they are experiencing __________ A) inflation B) a supply shock C) crowding out D) inflation illusion In the classical model, potential output can not be increased by A) monetary growth B) better technology C) more capital D) higher labour supply The equilibrium inflation rate is determined by the intersection of ___________ and __________ A) demand, supply B) IS, LM C) AD, AS D) Labour demand, Labour supply At the intersection of AD and AS equilbirum is achieved in A) the goods market B) the money market C) the labour market D) all of the above Fiscal expansion in the classical model can increase real output A) True B) False The Keynesian model is a good guide to _________ behavior and the classical model describes behavior in ____________ A) long run, short run B) flexible, imperfect markets C) short-term, long run D) long run, imperfect competition Temporary supply shocks alter potential output A) True

22


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Q.17: Q.18:

Q.19:

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Q.21: Q.22:

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B) False Expansionary fiscal policty in the classical model will cause aggregate demand to __________ potential output. A) exceed B) fall below C) fluctuate around D) remain equal to In the event of an increase in the international price of oil that encouraged the central bank to accept lower interest rate, inflation would most likely ____________ A) fall B) increase C) remain the same D) fluctuate The quantity theory of money says that changes in _________ lead to equivalent changes in _______, but have no effect on __________ A) prices, wages, output and employment B) output, prices, em ployment C) nominal money, the price level, output and employment D) nominal money, output, prices Monetarists believe that a reduction in ___________ can be achieved by reducing _________ A) unemployment, prices B) inflation, wages C) unemployment, wages D) inflation, the quantity of nominal money Faster nominal money growth leads to either higher inflation or higher nominal rates, but not both A) True B) False During periods of rising inflation and rising interest rates we expect the demand for real cash to A) rise B) fall C) not change D) fluctuate Governments may contribute to inflationary pressure on account of building up large ______ A) numbers of employees B) welfare plans C) budget deficits D) expenditure The Phillips Curve shows the trade-off between _______ and ___________ A) the inflation rate, interest rates B) the inflation rates, the unemployment rate C) interest rates, output D) output, employment Equilibrium unemployment is determined by the underlying rate of inflation A) True B) False The long-run Phillips Curve is __________ at the ____________ A) horizontal, natural rate of inflation B) horizontal, natural rate of unemployment C) vertical, natural rate of inflation D) vertical, equilibrium rate of unemployment The short run Phillips Curve can shift in response to changes in ___________ A) Inflationary e xpectations B) unemployment C) the inflation rate D) wage rates The costs of inflation are A) shoe leather costs

23


Q.25: Q.26:

Q.27:

Q.28: Q.29:

Q.30:

Q.31:

Q.32:

Q.33:

Q.34:

Q.35:


B) menue costs C) income redistribution D) uncertainty Only an incomes policy an deliver low inflation in the long run A) True B) False A person who is made redundant low inflation in the long run A) frictional unem ployment B) demand-deficient unemployment C) classical unemployment D) structural unem ployment An advocate of the classical model of the economy would claim that unemployment is created when the _____________ is above its equilibrium level in the ___________ A) price level, aggregate economy B) tax rate, governm ent budget C) wage rte, labour market D) interest rate, market for loanable funds The natural rate of unemployment, (equilibrium unemployment), will always be zero A) True B) False We would normally except the size of the labour force to be ____________ than the number of workers willing to accept job offers at any real wage rate A) smaller B) larger C) the same size D) none of the above The equilibrium rate of unemployment, at any real wage, is the difference between _________ and ___________ A) those willing to work at the going wage, labour demand B) labour demand, those willing to work at the going wage C) labour demand, labour supply D) those willing to work at the going wage, labour supply If somebody is prepared to work at the going wage rate but cannot find work then they are victims of A) voluntary unemployment B) classical unemployment C) voluntary unem ployment D) frictional unem ployment Policies to reduce unemployment by reducing union power, tax cuts, reductions in unemployment benefit and investment subsidies are examples of ____________ A) Keynesian policies B) supply-sider policies C) Monetarist policies D) Classical policies If the income tax rate changes from 30% to 40% on income over £30,000 and person’s income is £31,000 then her marginal tax rate is __________ A) 30% B) 10% C) 70% D) 40% The abolition of income tax would probably _______________ the number of workers in employment and ____________ the equilibrium rate of unemployment A) increase, reduce B) increase, increase C) reduce, increase D) reduce, reduce Possible causes of involuntary unemployment are

24


Q.36:


A) minimum wage agreements B) trade unions C) scale economies D) insider-outsider distinctions E) efficiency wages F) all of the above If a worker chooses not to work at he equilibrium wage rate they are involuntarily unemployed A) True B) False


B A D D B B B B D

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22 Q.26 Q.30 Q.34

B D B B A D D D A

Q.3 Q.7 Q.11 Q.15 Q.19 Q.23 Q.27 Q.31 Q.35

F A C C C A C C F

Q.4 Q.8 Q.12 Q.16 Q.20 Q.24 Q.28 Q.32 Q.36

A C B D B E B B B

25



SET-X If British residents want more French francs to purchase more French wine, other things equal, then the equilibrium value of the pound against the French franc will _______ A) rise B) fall C) not change D) fluctuate Q.2: When the $/£ exchange rate rises the pound _________, and when $/£ rate falls the pound _________ A) depreciates, appreciates B) revalues, devalues C) appreciates, depreciates D) becomes more expensive, becomes cheaper Q.3: When a government follows a fixed exchange rate regime it allows the exchange rate to be determined by market forces A) True B) False Q.4: In a fixed exchange rate regime, the central bank will intervene by ______ pounds to _______ the exchange rate A) selling, increase B) buying, reduce C) selling, reduce D) buying, increase E) a and b F) c and d Q.5: A current account deficit means that a country may _________ A) reduce its stock of foreign assets B) increase its stock of foreign assets C) increase its savings D) increase its foreign currency reserves Q.6: Under floating exchange rates, a current account deficit must be exactly matched by a capital account surplus A) True B) False Q.7: Starting from a position of internal and external balance, a reduction in aggregate demand will cause a current account _____________ A) deficit B) surplus C) revaluation D) devaluation Q.8: A rise in the real exchange rate will ___________ the competitiveness of the domestic economy A) increase B) reduce C) do nothing to D) disturb Q.9: Within the circular flow of income, an increase in domestic income will tend to increase A) exports B) taxes C) inventories D) imports Q.10: Perfect international capital mobility suggests that international funds will be responsive to ________ differentials A) current account B) interest rate C) tax D) price Q.11: When capital mobility is perfect, interest rate differentials will tend to be offset by ________

Q.1:

26


Q.12:

Q.13:

Q.14:

Q,15:

Q.16:

Q.17:

Q.18: Q.19:

Q.20:

Q.21:

Q.22:


A) price differences B) balance of payments differences C) current account differences D) expected exchange rate changes The current account will differ from trade balance because of interest flows from foreign assets and debts A) True B) False With fixed exchange rate and no private capital flows, to correct a balance of payment deficit, the central bank will _________ and _____________ A) buy foreign exchange, sell domestic currency B) sell foreign exchange, buy domestic currency C) buy foreign exchange, buy domestic currency D) sell foreign exchange, sell domestic currency With fixed exchange rates and no private currency flows, when the central bank buys domestic currency the domestic money supply is ____________ A) increased B) unaffected C) reduced D) affected In the absence of international capital controls, central bank set _________ to provide the correct incentive for speculators. A) Money supply targets B) Incomes policy C) Interest rates D) Inflation targets A fixed exchange rate , plus perfect capital mobility ________ the scope for monetary policy A) enhances B) undermines C) encourages D) facilitates The competitive advantage from a devaluation is likely to be offset by ________ and _______ A) higher import prices, higher wage increases B) lower export prices, lower import volumes C) higher import prices, lower export prices D) higher wage increases, lower import volumes Under floating exchange rates, monetary policy is a powerful tool A) True B) False Under floating exchange rates, expectation of higher interest rates are likely to cause an _________ of the exchange A) depreciation B) appreciation C) fall D) devaluation In the short run, the level of floating exchange rates is determined mainly by __________ A) interest rates B) competitiveness C) trade D) speculation If one country, with floating exchange rates, has higher inflation than its competitors, we would expect its exchange rate to ____________ A) appreciate B) depreciate C) revalue D) be in short supply Floating exchange rates are __________ in the short run.

27


Q.23: Q.24:

Q.25:

Q.26:

Q.27:

Q.28:

Q.29:

Q.30:

Q.31: Q.32:

Q.33:

Q.34:


A) stable B) predictable C) volatile D) depreciating Fixed exchange rates permit a country to have permanently higher inflation A) True B) False Fiscal policy is weak under floating exchange rates as fiscal expansion __________ A) crowds out imports B) crowds out public consumption C) crowds out exports D) reduces the budget deficit The main factor affecting the long run path of the Pakistan’s nominal exchange rate is the growth of world trade A) True B) False The main features of the European Monetary system are A) the ECU B) currency swap agreement between member countries C) the exchange rate mechanism D) all of the above In the ERM, each country fixed _________ against each other ERM participant. Collectively the group ____________ against the rest of the world. A) a nominal exchange rate, floated B) a real exchange rate, pegged C) a purchasing power parity, pegged D) a real exchange rate, floated Internationa policy co-ordination allows policy makers to commit to policies they would otherwise avoid A) True B) False The single European Act committed ___________ governments to a ___________ in 1992 A) European union, single market B) Wester European, single currency area C) European Union, single currency area D) Western European, single market All of the following are benefits of the Single Market Except A) it allows countries to exploit their comparative advantage, more fully B) firms could more readily exploit economies of scale C) it intensified competition D) it is easier to book holidays in member countries The Maastricht criteria for joining EMU is that a country must have a high growth rate A) True B) False A monetary union means _________, ___________ and __________ A) permanently fixed capital movements, floating exchange rates, a fixed structure of interest rates B) permanently fixed exchange rates, free capital movements, a single interest rate C) a common currency, a single central bank, common monetary policy D) a common currency, floating exchange rates, common monetary policy The Maastricht criteria for entry to he EMU are that applicants should have A) low inflation B) low interest rates C) stable nominal exchange rate D) budget deficits and government debt under control E) all of the above The UK is a member of the EMU

28


Q.35:


A) True B) False In the EMU a country’s competitiveness can change because of _________ A) interest rate adjustment B) central bank intervention in the forex C) domestic wage and price adjustement D) devaluation


B A D B A B B A E

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22 Q.26 Q.30 Q.34

C A B C A C D D B

Q.3 Q.7 Q.11 Q.15 Q.19 Q.23 Q.27 Q.31 Q.35

B B D C B B A B C

Q.4 Q.8 Q.12 Q.16 Q.20 Q.24 Q.28 Q.32

F B A B D C A B

29


Q.1:

Q.2:

Q.3: Q.4:

Q.5:

Q.6: Q.7:

Q.8: Q.9:

Q.10:

Q.11:

Q.12: Q.13:


SET-XI GDP per head may be imperfect measure of economic welfare because it excludes_________ A) the value of leisure B) externalities C) untraded goods D) changes in the distribution of income E) all of the above Potential output can be increased by _________ or by _________ A) increasing the use of labour, increasing the use of land B) increasing the use of capital, increasing the use of labour C) increasing the use of land, increasing the use of capital D) increasing the use of all inputs, technical advances If a production input is in fixed supply, growth is impossible in the long run A) True B) False The neoclassical theory of growth identifies the steady state rate of growth as the ________ just sufficient to keep ______ constant while labour grows A) saving, investment B) capital per person, productivity C) labour growth, output D) investment, capital per person In the neoclassical theory of growth, a higher saving rate leads to _________ A) a higher growth rate B) a fluctuating growth rate C) a lower growth rate D) no change in the growth rate The convergence hypothesis states that poor countries grow more slowly than average, but rich countries grow more quickly than average A) True B) False Economic growth may depend upon ___________ and _________ A) population size, x-efficiency B) population age distribution, education C) population growth, technical progress D) population growth, education The zero-growth proposal argues that it is best to aim for zero-growth in measured GNP to avoid environmental costs. A) True B) False The growth rates of economies tend to converge because _____________ is easier when capital per workder is low and because of ____________ A) capital-widening, technical innovation B) capital-widening, catch-up in technology C) capital-deepening, technical innovation D) capital-deepening, catch-up in technology The business cycle describes fluctuations in output around the __________ A) trend path of output B) boom C) recession D) short-run fluctuations in output All of the following are parts of the business cycle except ______________ A) boom B) slump C) recovery D) acceleration The political business cycle arises because politicians interfere with the economy for political advantage A) True B) False The theory that explains business cycles by the dynamic interaction of consumption and investment is the ____________

30


Q.14:

Q.15:

Q.16:

Q.17: Q.18:

Q.19:

Q.20:

Q.21:

Q.22:


A) sun spot theory B) multiplier-accelerator model C) solow theory D) New classical theory The multiplier-accelerator model assumes ______________ depends on _________ A) consumption, expected future profits B) investment, interest rates C) investment, expected future profits D) stock building, interest rates Real business cycle theory suggests that ____________ not important in explaining short-term fluctuations around actual output A) aggregate supply is B) aggregate demand is C) potential output is D) real variables are The impossibility of negative gross investment provides a __________ to fluctuations in __________ A) ceiling, stockbuilding B) ceiling, capital prices C) floor, output D) floor, the capital-output ratio Output can exceed demand during the recovery phase as firms restore stocks to their target levels A) True B) False Real business cycles are cycles in ____________ A) potential output B) actual output C) real output D) international trade Real business cycle theories suggest that __________ to correct departures from the desired growth path A) there is a role for fiscal policy B) there is a role for monetary policy C) there is a role for supply-sider policies D) there is no case for stabilizing output over the business cycle The business cycle is not transmitted from one country to another through ________A) private sector impors and exports B) economic policy C) the duration of compulsory education D) labour supply changes Real business cycle theorists argue that _________ can explain short and long term fluctuations in output A) imperfect labour markets B) rational expectations C) international decisions of households, firms and government D) sun spot cycles Keynesian unemployment causes a fall in the real wage A) True B) False

ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17 Q.21

E D D B A C

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22

D B A C A B

Q.3 Q.7 Q.11 Q.15 Q.19

B C D B D

Q.4 Q.8 Q.12 Q.16 Q.20

D A A C C

31


Q.1:

Q.2:

Q.3:

Q.4:

Q.5:

Q.6: Q.7:

Q.8:

Q.9: Q.10:

Q.11:

Q.12: Q.13:


SET-XII International specialization takes place because of _____________ A) differences in technology B) differences in factor endowments C) scale economies D) all of the above International differences in opportunity costs lead to countries acquiring __________ A) comparative advantage B) high exchange rates C) trade barriers D) trade quotas If a country does not have an absolute cost advantage in the production of any good, there is no incentive to trade A) True B) False The main cause of different relative costs between countries are __________ A) relative factor competition B) relative factor mobility C) relative factor substitution D) relative factor endowments The level of the equilibrium exchange rate offsets international differences in ___________ A) comparative advantage B) absolute advantage C) opportunity costs D) relative costs International trade can never hurt any people A) True B) False The imposition of a tariff causes consumption to _____________ and imports to __________ A) rise, rise B) fall, rise C) fall, fall D) rise, fall A tariff causes domestic firms to _________and consumers to _________ A) overproduce, underconsume B) overproduce, overconsume C) underproduce, underconsume D) underproduce, overconsume Tariffs always distort trade and are never justified. A) True B) False An optimal tariff is one which reduces imports to the level at which ________ equals _________ A) imports, exports B) the balance of trade, zero C) the demand for currency, the supply of currency D) social marginal cost, social marginal benefit If goods are exported for less than society’s marginal production cost and the marginal benefit to domestic consumers, it is likely that they benefit from __________ A) an import subsidy B) a quota C) comparative advantage D) an export subsidy Export subsidies do not involve waste A) True B) False Economic transaction involves high inflation because __________ and __________ A) high monetary growth, high wages

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B) C) D)

high budget deficits, devaluation high monetary growth, devaluation prices surge from an artificially low level to their equilibrium level, the inflation tax is required as source of government revenue Q.14: Output fell sharply in the transition economies because A) banks were unable to function B) there was little corporate control C) vital infrastructure was missing D) all of the above Q.15: Most transition economies are seeking membership of the EU A) True B) False Q.16: All of the following represent obstacles to LDC development except A) resource scarcity B) low levels of investment C) low population D) poor infrastructure E) poor human capital Q.17: LDCs often have a comparative advantage in the production of _________ A) primary products B) intermediate goods C) manufactured products D) financial services Q.18: LDCs are reluctant to pursue development through the export of primary products because of ________ and ____________ A) the upward trend in commodity prices, the stability of primary products real prices B) the upward trend in commodity prices, the volatility of primary products real prices C) the downward trend in commodity prices, the stability of primary products real prices D) the downward trend in commodity prices, the volatility of primary products real prices Q.19: Buffer stocks increase price volatility in an unstable market A) True B) False Q.20: Import substitution is the replacement of ___________ by domestic production under the protection of __________ A) exports, subsidies B) exports, patents C) imports, high tarrifs or import quotas D) imports, subsidies Q.21: If a country has a burden of debt it cannot sustain it can ____________ A) reschedule debt B) get a loan form an international organization C) default on the loan D) any of the above Q.22: If an LDC chooses structural adjustment as a strategy for development, it will nationalize its principle industries. A) True B) False ANSWERS:Q.1 Q.5 Q.9 Q.13 Q.17 Q.21

D B B D A D

Q.2 Q.6 Q.10 Q.14 Q.18 Q.22

A B D D D B

Q.3 Q.7 Q.11 Q.15 Q.19

B C D A B

Best of Luck! From: Sami Iqbal, M.A. Economics (P.U) ~ Visiting Lecturer Follow me on Facebook:- [email protected] (My Facebook Account) Contact: +92-322-8458065 / +92-334-9839669 for further guidance.

Q.4 Q.8 Q.12 Q.16 Q.20

D A B C C

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General Instructions for Answer Sheet:1. Your paper will be of 2 hours consisting of 100 MCQs relevant to your subject. 2. You will be provided an OMR answer sheet (sample given above) 3. Just Use Black or Blue Marker to fill the OMR answer sheet in the paper. 1. Candidate Particulars In this Section candidate will write name, father name, Post Applied for, CNIC and Examination Centre 2. Instructions In this Section instructions are given for the candidate for filling the the answer choices box with examples. 3. MCQ Answer CHOICES (1 to 100) There are a Total of 100 questions. Each question has four choices from which candidate have to select the most appropriate answer. In some questions, there may not be an exact answer. In such cases select an answer which is most nearly correct. Against each question one line of options from A - D is given. Mark choice by filling in the appropriate Box of the line (A to D) completely, making it dark with Blue or Black marker as shown below. Question 1. Which is the capital of Pakistan? A. Lahore B. Karachi C. Islamabad D. Peshawar

Answer: The correct answer is Islamabad i.e. C. Hence the box should be filled in line opposite Q.1 on the answer sheet. Wrong Filling Remarks

Q.1

Examples

The grading computer will mark improperly filled boxes as incorrect answers. Computer will also mark boxes with stray marks orpartially filled or boxes filled more than once , asinvalid answer .

4. Signature of Candidate In this Section candidate will affix signature in the signature box only. Signatures going out of Signature box may reject answer sheet to process through grading machine. 5. Office Use This Section is for office Use only. Candidate should not write any thing in this area.

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6. Roll Number FILLING SECTION In this section candidate will write Roll Number. The proper way of writing Roll No. is as under. Roll No. Filling Examples Roll Number 1017











 

 





Roll Number 57

Wrong Filling of Roll Number

7. TIME LINE This Section is computer graded area. Writing any thing in this area may reject answer sheet to process through grading machine. 8. Signature of Supervisor In this section supervisor will affix signature in the signature box. Write your allotted roll number in the top right corner of QUESTION PAPER and in the specified place of ANSWER SHEET Read the QUESTION PAPER carefully and mark your answers on the ANSWER SHEET Each question has four options. Fill only one box that you think is correct answer. 0.25 marks will be deducted for each incorrect answer Instructions for filling box have been given on the Answer Sheet. Read them before attempting Read the instructions for filling your ROLL NO and marking your answer on the ANSWER SHEET before starting answering Sign the Answer Sheet in the box provided at the left bottom corner Return both Question Paper and Answer Sheet, to the staff, at the end of test What to Do Use Black Marker only for solving the MCQs answer sheet. Use Answer sheet for answering the questions, No answer will be acceptable if written on the Question paper. All answers must be written on the Answer Sheet. Avoid any un-necessary mark / line on any area of the sheet except the designated area for writing / filling of Answers, Roll No, & Name etc. Use separate sheet for rough work, if required

Lecturer Economics MCQs[1]

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