PAPER 2005
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) The greatest requirement for economic development is:
(a) To sacrifice present enjoyment for tomorrow’s benefit.
(b) Increase in National income.
(c) Invention and innovation in all productive sectors
(d) Mechanization of agriculture

(2) Per Capita output would probably rise but output per worker would fall if;
(a) Capital deepening occurred rapidly.
(b) Labour force participation rate of the population rose
(c) Technical education of the work
(d) Involuntary saving was increased

(3) Most of underdeveloped countries are agricultural with low income and needs:
(a) Increase in income of the people depends upon agriculture output.
(b) Land can be owned collectively.
(c) Land can be owned by large capitalist farmers.
(d) Land can be owned by labourers who fill it.

(4) Voluntary saving will most likely increase if:
(a) Tax rates are increased
(b) Interest rate rise
(c) Distribution of income becomes more unequal
(d) The rate of inflation increase

(5) Economic growth:
(a) Is synonymous with economic development
(b) Refers to qualitative change experienced by an economic system
(c) When an economic system acquires greater productive capacity.
(d) Always result in increased real per capita output

(6) Capital deepening:
(a) Is an increase in the ration of labour to capital
(b) Necessarily increases real per capita output
(c) Is less likely to be effective in fostering growth in rich countries than in poor countries
(d) Can occur when saving rates are zero

(7) Interest of the developed world in the development of under developed economies on:
(a) General political freedom and promotion of free societies
(b) If world is not free their freedom would be in danger
(c) They want to stop and check tyranny and aggression
(d) Developed countries need customers for their surplus production.

(8) GNP at factor cost may be best defined as:
(a) The total of goods and services produced within an economy over a given time period.
(b) The total of expenditure of consumers on domestically produced goods and services.
(c) All incomes received by residents in a country in return for factor services provided domestically and abroad.
(d) The value of total output produced domestically plus net property income from abroad minus capital consumption

(9) Which one of the following is a transfer payment in National income accounting?
(a) Educational scholarship
(b) Salaries of employees
(c) Payments for text books
(d) Payment for examination fee

(10) Which is the basic concept which underlies accelerator theory of investment?
(a) Investment depends on the level of savings
(b) Investment is inversely related to the rate of interest
(c) Investment is determined by the volume of Commercial Bank Lending
(d) Investment rises when there is an increase in the rate of growth of demand in the economy

(11) Which one of the following would cause a fall in the level of aggregate demand in the economy?
(a) A decrease in the level of imports
(b) A fall in the propensity to save
(c) A decrease in government expenditure
(d) A decrease in the level of income tax

(12) Capital formation remained very low in Pakistan due to:
(a) Low saving rate
(b) Savings are not fully invested
(c) Money and capital market are not suitable
(d) Due to high rate of inflation purchasing power is very low

(13) Efficient allocation of resources in an economy occurs whenever:
(a) Prices is equated to Marginal social cost in some units
(b) Income and wealth are distributed in a fair way
(c) There is full employment of resources
(d) The existing resource allocation cannot be changed without making it worse off.

(14) When a worker earns more than the just sufficient to keep him in his job, the excess income is called:
(a) An opportunity cost
(b) An economic rent
(c) Transfer earnings
(d) Surplus value

(15) There are 5 workers in a field and each one is paid at the rate of Rs. 200 per day. Later on raising wage rate by Rs. 50 per day to attract one more worker. If other costs remain constant, marginal input cost of employing the additional worker is:
(a) Rs. 400
(b) Rs. 45
(c) Rs. 700
(d) Rs. 300

(16) If state wishes to stimulate consumption, which one of the following measures be the most effective?
(a) Increase in aid to agriculture and industry
(b) An increase in old age pension
(c) A decrease in higher rates of income tax
(d) A decrease in personal tax allowances

(17) The incidence of tax refers to:
(a) Who economically bear the burden of the tax
(b) The canons of taxation
(c) Type of tax, direct or indirect tax
(d) Whether the tax is continuously or periodically levied.

(18) During the inflationary period, when income tax revenue rises faster than National income, this illustrates:
(a) The situation of unemployment trap.
(b) The poverty trap
(c) Fiscal boost
(d) Fiscal drag

(19) A balance of payment surplus may cause:
(a) Employment and the money supply to rise.
(b) The money supplies to fall
(c) Employment to rise and the money supply to fall
(d) Employment and the money supply to fall.

(20) Green revolution refers to:
(a) Introduction of modern technology
(b) Reform in land tenure system
(c) Introduction of agro-based industry
(d) Boosting exports of agricultural products