Objectives of past papers of Economics-II

[huma gillani]

ECONOMICS-II
PAPER 2001
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) External debt servicing is greater than:
(a) Social sector spending
(b) Defense spending
(c) Agriculture servicing
(d) Industrial sector investment
(e) None of these

(2) Pakistan foreign earnings largely depend on:
(a) Agricultural products
(b) Industrial products
(c) Overseas Pakistan remittances
(d) Software exports
(e) None of these

(3) Nationalization of 70s in Pakistan has done:
(a) More good to the economy
(b) More harm to the economy
(c) Has not affected the economy substantially
(d) Has not been effective considerably
(e) None of these

(4) The largest revenue collection is through:
(a) Income tax
(b) GST
(c) Customs duty
(d) Wealth tax
(e) None of these

(5) Per capita income in Pakistan in the last 5 years is:
(a) Increasing substantially
(b) Decreasing marginally
(c) Constant largely
(d) Increasing in the first two years, but decreasing in the subsequent three years.
(e) None of these

(6) The economic growth rate in Pakistan in the last 5 years is:
(a) Declining in trend
(b) Static almost
(c) Increasing Flatulently
(d) Improving constantly
(e) None of these

(7) The GDP growth in Pakistan largely depends on:
(a) Manufacturing sector
(b) Agriculture sector
(c) Service sector
(d) None of these

(8) Large scale manufacturing sector growth rate in Pakistan in the last financial year was about:
(a) 15%
(b) 10%
(c) 5%
(d) 0%
(e) None of these

(9) Which is the highest body to approve the public sector financial outlay.
(a) DDWP
(b) CDWP
(c) ECNEC
(d) NEC
(e) None of these

(10) Education spending as share of the budget in Pakistan is nearly:
(a) 15%
(b) 12%
(c) 10%
(d) 8%
(e) None of these

(B) Indicate either the following statements are true or false. Explain your answer.

(11) Due to inflation the nominal GNP of Pakistan is increasing while its real GNP is falling.

(12) Since the freezing of foreign accounts, GDP of Pakistan is greater than its GNP.

(13) Pakistan’s balance of trade is in deficit owing to continue devaluation of the Pak Rupee.

(14) In contract of “Hechschers-Ohlin” theorem Pakistan is exporting labour intensive goods while importing capital-intensive commodities.

(15) The privatization commission of Pakistan is in fact a follow up of demand side policy.

(16) The establishment of Khushali Bank is a follow up of supply side policy.

(17) The failure of monetary policy in Pakistan owing to less sensitivity of investment demand to rate of interest.

(18) Due to tax consumption allowance, the government employees in Pakistan are in fact paying low tax per Rupees earned.

(19) Devaluation of Pak currency definitely causes an increase in foreign debt in real terms, but not in nominal terms.

(20) Government of Pakistan mainly borrows from general public by selling its securities.

[huma gillani]

PAPER 2002
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) The real GDP growth was _________ in fiscal year 2001 – 2002.
(a) 3.4%
(b) 3.6%
(c) 3.8%
(d) 4%
(e) None of these

(2) The slower growth in real GDP over the last two years has been caused mainly by:
(a) Low investment
(b) Continuation of catastrophic droughts
(c) Decline in the contribution of services sector
(d) Growth performance of many developed and emerging market economies.
(e) None of these

(3) Population growth rate in Pakistan is:
(a) 2.2%
(b) 2.4%
(c) 2.6%
(d) 2.8%
(e) None of these

(4) More than half of the total FDI inflows in Pakistan is contributed by:
(a) USA
(b) UK
(c) Japan
(d) UAE
(e) None of these

(5) The national saving rate has increased by __________ percentage points of GDP since 1998 – 99.
(a) 2.7
(b) 3.7
(c) 4.7
(d) 5.7
(e) None of these

(6) The largest sector, attracting a big chunk of total foreign direct investment in Pakistan is:
(a) Trade, Transport and Communications.
(b) Chemical and Pharmaceuticals
(c) Oil and Gas and Power Sector
(d) Electronics
(e) None of these

(7) Global GDP approximates to:
(a) $ 10 trillion
(b) $ 20 trillion
(c) $ 30 trillion
(d) $ 40 trillion
(e) None of these

(8) Based on the requirements of 2150 calories, the Government of Pakistan has adopted the official poverty line in 1998 – 99 as ______ per capita per month.
(a) Rs. 450
(b) Rs. 550
(c) Rs. 600
(d) Rs. 650
(e) None of these

(9) Almost 40% of the CBR revenue originates from:
(a) Personal and corporate income
(b) Imports
(c) Wealth
(d) Natural Gas & Petroleum
(e) None of these

(10) Pakistan’s non-agricultural GDP in 2001 – 2002 was ______ that of last year figures.
(a) More than
(b) Less than
(c) Equal to

(11) According to the Budget estimate for the year 2002 – 2003, the appropriate ratio of Development expenditure to current expenditure is:
(a) 1:3
(b) 1:4
(c) 1:5
(d) 1:6
(e) None of these

(12) A commodity is considered to be a “luxury” of its income elasticity is:
(a) Equal to one
(b) Greater than one
(c) Less than one
(d) Zero
(e) None of these

(13) Value bonds fall when:
(a) Invest rate falls
(b) Invest rate rises
(c) Invest rate remains constant for long time
(d) Invest rate fluctuates
(e) None of these

(14) Monopolistic exploitation and monopolistic competition:
(a) Are the same
(b) Latte results in the former
(c) Former results in the latter
(d) Former refers to higher prices and latter to differentiated products.
(e) None of these

(15) Beside other instrument, the State Bank can change money stock by manipulating:
(a) The currency deposit ratio
(b) The reserve deposit ratio
(c) Market and discount rate
(d) All of the above
(e) None of the (a), (c) and (c)

(16) Pakistan is pursuing:
(a) Fixed exchange rate system
(b) Flexible exchange rate system
(c) Manages float through Banks
(d) All of the above
(e) None of the (a), (c) and (c)

(17) Monetary policy that results in lowering interests rate is:
(a) Contractionary
(b) Expansionary
(c) Moderate
(d) Deflationary
(e) None of these

(18) The Bonus Voucher or Export Bonus Scheme was introduced in the year:
(a) 1957
(b) 1958
(c) 1959
(d) 1960
(e) None of these

(19) The Bad luck factor responsible for poor performance of economy in 1970’s is:
(a) Massive floods and crops failure
(b) Global Oil Crises
(c) World recession following OPEC price rise
(d) All of the above
(e) None of the (a), (c) and (c)

(20) Although they never materialized, recommendations of the Muslim League Land Reform Committee were put forward in:
(a) 1947
(b) 1948
(c) 1952
(d) 1954
(e) None of these

[zumar khan]

thanks once again.
waiting for the rest of them.

[huma gillani]

Paper 2003
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) Balance of payments deficit implies:
(a) Deficit in the current account
(b) Deficit in the Capital account
(c) Deficit in the trade balance
(d) All of these
(e) None of these

(2) Pakistan’s major trading partners are:
(a) Japan and China
(b) Islamic countries
(c) Western Europe and USA
(d) Both (a) and (b)
(e) None of these

(3) Pakistan became a member of Multifibre Arrangements (MFA) in:
(a) 1950s
(b) 1960s
(c) 1970s
(d) None of these

(4) Presently in Pakistan the largest contribution to GDP is made by the:
(a) Primary sector
(b) Secondary sector
(c) Tertiary sector
(d) None of these

(5) The tertiary sector includes:
(a) Professional services
(b) Transport services
(c) Distributive services
(d) All of these
(e) None of these

(6) Pakistan’s custom duty rates are highest on:
(a) Intermediate goods
(b) Consumer goods
(c) Basic raw materials
(d) Chemicals and components
(e) None of these

(7) In the textiles sector of Pakistan, the largest number of firms belongs to:
(a) Integrated textile mills
(b) Independent Weaving units
(c) Power looms sector
(d) None of these

(8) The largest number of sugar mills working in Pakistan is in:
(a) Sindh
(b) Punjab
(c) NWFP
(d) None of these

(9) SMEDA is an acronym for:
(a) Southern Motorway Engineering and Development Authority
(b) Sindh Microclimate and Environmental Design Agency
(c) Salinity Management and Environmental Development Authority
(d) None of these

(10) The region receiving the smallest share of FDI inflows to developing countries is:
(a) Latin America and Caribbean
(b) Ease and South East Asia
(c) South Asia
(d) None of these

(11) The largest source of FDI in Pakistan is:
(a) Germany
(b) Canada
(c) Korea
(d) None of these

(12) In Pakistan, the largest sectoral share of FDI goes to:
(a) Power
(b) Textiles
(c) Financial business
(d) None of these

(13) In Pakistan the average annual size of the GIni-coefficient was highest in:
(a) 1960s
(b) 1970s
(c) 1980s
(d) 1990s
(e) None of these

(14) The average annual GDP growth rate in Pakistan has been lowest in:
(a) 1960s
(b) 1970s
(c) 1980s
(d) 1990s
(e) None of these

(15) After defense, the largest share of Pakistan government’s current expenditures goes to:
(a) General administration
(b) Current subsidies
(c) Socio-economic and community services
(d) None of these

(16) The largest revenue source of Pakistan’s government’s comes from:
(a) Direct taxes
(b) Custom taxes
(c) Sales taxes
(d) None of these

(17) The internal outstanding debt in Pakistan is:
(a) Greater than the GDP
(b) About a quarter of the GDP
(c) About 3 quarters of the GDP
(d) None of these

(18) Major part of foreign aid to Pakistan comes from:
(a) Consortium countries
(b) Islamic countries
(c) Non consortium countries
(d) Both (b) and (c)

(19) Pakistan’s external outstanding debt is:
(a) More than her GDP
(b) About half of her GDP
(c) A little over one third of her GDP
(d) None of these

(20) In Pakistan, Public Sector expenditures on education are:
(a) 10% of GDP
(b) 7% of GDP
(c) 5% of GDP
(d) None of these

[huma gillani]

PAPER 2004
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) Most of the public sector projects were in loss because:
(a) Setting up of industries in backward areas
(b) Where private investors were hesitant to invest
(c) Profit making was not the objective
(d) Projects were facing numerous problems and consumers were exposed to taxes

(2) Many manufacturers units were nationalized because:
(a) 22 families were found having control over a lion share
(b) Producers paid wages which were below the subsistence wage rate
(c) Capitalist class was given protection
(d) Consumers had to face increasing indirect taxes

(3) Which of the following be the reason for poor performance of Nationalized Units:
(a) Repeated rupee devaluation
(b) Multiple exchange rate system
(c) Import duties and tariff walls reduced
(d) Tax rebates and incentives to the producers were withdrawn

(4) The main objective of a wage and income policy is:
(a) An increase in economic growth and reduced unemployment
(b) Wage increases with out-break of inflation
(c) To increase exports and reduce current account deficit
(d) Have low interest rate

(5) Safety net is a level of income that:
(a) Union want
(b) Employees want
(c) Employers want
(d) Is minimum amount acceptable

(6) Wage and income policy help reduce in:
(a) Cost push inflation in the country
(b) Demand pull inflation
(c) Supply
(d) Demand

(7) The need for competition is:
(a) That the economy is productive and efficient
(b) Job creation
(c) Reduction in foreign trade
(d) Economic growth

(8) Fixed capital means:
(a) Stocks or inventories of raw materials
(b) The machinery & equipments used
(c) Corporate bonds
(d) Structures, building and equipments.

(9) If capital consumption is greater than gross investment:
(a) Gross investment must be negative
(b) Gross investment must be declining
(c) Net investment is negative
(d) Replacement investment is ris

(10) A surplus balance of payment may cause:
(a) Employment and money may cause
(b) Money supply to fall
(c) Employment to rise and money supply to fall
(d) Employment and money supply to fall

(11) Invisible exports include all the following except:
(a) Government spending on military bases located outside country.
(b) Gifts received by residents from foreign relatives.
(c) Flows of dividends into the country
(d) Money spent abroad by the residents on tourism

(12) Incidence of a tax refers to:
(a) Who eventually bears the burden to tax
(b) A principle of taxation
(c) Whether the tax is direct or indirect
(d) A tax is periodically levied

(13) During a period of inflation, income tax revenue rises faster than income, illustrate:
(a) Unemployment trap
(b) Poverty trap
(c) Fiscal boost
(d) Fiscal drag

(14) Causes of poverty tarp include the:
(a) Income tax being set lower than the benefits
(b) Existence of black economy
(c) Process of fiscal boost
(d) Regressive nature of income tax

(15) Privatized industry which benefits from economies of scale, it is likely that:
(a) Efficiency will improve and profits will increase
(b) Efficiency will improve but losses will be made
(c) Industry’s monopoly power will diminish
(d) The industry will be easier to Nationalize

(16) The economic problem of deciding what goods to produce is decided by:
(a) Supply or demand
(b) Profit prices
(c) Shadow prices
(d) Relative prices

(17) Supply of agriculture credit from all sources is:
(a) 67924.8 m
(b) 97924.8 m
(c) 47924.8 m
(d) 27924.8 m
(e) None of these

(18) To reduce economic disparities, which one will prove effective?
(a) Market imperfection be removed
(b) Information system be made effective
(c) Population pressure be controlled
(d) Taxation system be made effective

(19) Terms of Trade refer to:
(a) Volume of exports and imports
(b) Volume of balance of trade to balance of imports
(c) Relationship between export prices and import prices
(d) Exchange value of currencies between two countries

(20) Pakistan exports are primarily:
(a) Manufactured goods
(b) Sports goods
(c) Primary products
(d) Tertiary products

[huma gillani]

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

[huma gillani]

PAPER 2007
COMPULSORY QUESTION
8. Write only correct answer in the Answer Book. Do not reproduce the question.

(1) A market is in equilibrium, when:
(a) AC = P
(b) MC = MR
(c) AC = AR
(d) TC = TR
(e) None of these

(2) Consumer’s surplus occurs, when:
(a) Personal valuation exceeds the market valuation
(b) Market valuation exceeds the personal valuation
(c) Market valuation equals the personal valuation
(d) Market valuation equals the market price
(e) None of these

(3) Livestock is:
(a) An independent Sector
(b) Sub-sector of Agriculture
(c) Should be a part of Agriculture
(d) Would become a part of Agriculture

(4) Unemployment Rate is a percentage relation with reference to:
(a) Total Population
(b) Civilian Labour Force
(c) Employed Persons
(d) Unemployed Persons
(e) None of these

(5) Devaluation of rupee would result into:
(a) Expensive exports
(b) Expensive Imports
(c) Expensive Labour
(d) Overvalued Rupee
(e) None of these

(6) Indirect Taxes are:
(a) Direct Taxes - Subsidies
(b) Subsidies
(c) Sales Taxes
(d) Income Taxes
(e) None of these

(7) Negative taxation refers to:
(a) Tax Rebate
(b) Subsidies
(c) Tax Evasion
(d) Tax Avoidance
(e) None of these

(8) Most commonly referred indicator of Inflation is:
(a) Wholesale Price Index
(b) Retail Price Index
(c) Sensitivity Price Index
(d) Consumer Price Index
(e) None of these

(9) If saving Rate is 12.0%, ICOR Value is 3% and Population Rate is 2.0%, then the Growth Rate would be:
(a) 2.0%
(b) 3.6%
(c) 4.0%
(d) 6.0%
(e) None of these

NOTE: Data in the following questions refer to Pakistan Economic Survey: Fiscal Year 2005-06

(10) National Income Accounts of Pakistan have registered GDP & GNP (at market prices) as:
(a) GDP = GNP
(b) GDP < GNP
(c) GDP > GNP
(d) GDP = NNP
(e) None of these

(11) Pakistan’s Economic Growth was:
(a) 7.5%
(b) 8.6%
(c) 6.6%
(d) 5.1%
(e) None of these

(12) Weight of Agriculture Sector in GDP Structure is:
(a) 47.7%
(b) 21.6%
(c) 24.0%
(d) 38.9%
(e) None of these

(13) Unemployment Rate is:
(a) 6.5%
(b) 7.7%
(c) 7.8%
(d) 8.3%
(e) None of these

(14) Tax/GDP Ratio is:
(a) 9.2%
(b) 10.4%
(c) 11.0%
(d) 13.2%
(e) None of these

(15) Overall Fiscal Deficit with reference to GDP is:
(a) 2.4%
(b) 3.3%
(c) 4.2%
(d) 5.0%
(e) None of these

(16) Domestic Savings with reference to GDP is:
(a) 14.4%
(b) 15.7%
(c) 18.1%
(d) 22.0%
(e) None of these

(17) Health Expenditure with reference to GDP is:
(a) 0.5%
(b) 0.6%
(c) 0.7%
(d) 0.8%
(e) None of these

(18) Education expenditure with reference to GDP is:
(a) 1.6%
(b) 1.7%
(c) 1.9%
(d) 2.1%
(e) None of these

(19) As % of GDP, External Debt Liabilities declined in March 2006 to
(a) 30.9%
(b) 32.6%
(c) 28.3%
(d) 20.0%
(e) None of these

(20) The number of SOEs privatized upto April 2006 are:
(a) 140
(b) 151
(c) 160
(d) 184
(e) None of these

[huma gillani]

PAPER 2008
COMPULSORY
Q.1 Select the best option/answer and fill in the appropriate box on the Answer Sheet.

(1) Had net exports in Pakistan been reduced to “Zero” by contractionary fiscal policy through the first half of the 1980’s, the Pakistan economy would have:
(a) Been producing output will above the full employment level of GNP
(b) Been producing output slightly above the full employment level of GNP
(c) Been producing output nearly equal to the full employment level of GNP
(d) Been producing output slightly lower to the full employment level of GNP
(e) Been producing output considerably lower than the full employment level of GNP

(2) The internal rate of return of any capital good could reasonably be described as:
(a) The particular rate of interest at which the capital good would just be worth buying or building, i.e., the present value of revenue would just be matched by costs.
(b) The dollar amount of profit that would accrue if that capital good were bought or build.
(c) The same thing as the market rate of interest.
(d) The physical increase in output (as distinct from the money value) that would accrue if the capital good were bought or built.
(e) The percentage figure obtained by adding up all net revenues that would accrue from the capital good and dividing this total its cost.

(3) Consumers have budgeted a fixed money amount to buy a certain commodity. Within a certain range of prices, they will spend neither more nor less than this amount on it. Their demand in this price range would properly be designated as:
(a) In equilibrium
(b) Perfectly elastic
(c) Perfectly inelastic
(d) Highly inelastic but not perfectly so.
(e) Unit-elastic

(4) An economy operating at full employment enters a period of high anticipated inflation. Which of the following statements accurately describes the likely result?
(a) Most people increase savings to be better prepared for the higher prices that they know are coming, thereby increasing capital investment, stimulating the rate of economic growth, and supporting lower interest rates.
(b) Most people decrease savings to increase current consumption and capital investment, thereby stimulating economic growth and supporting lower interest rates.
(c) Most people decrease savings to increase current consumption, thereby slowing capital investment, slowing the rate of economic growth and supporting lower interest rate.
(d) Most people increase savings to the better prepared for the higher prices that they know are coming, thereby reducing capital investment, slowing the rate of economic growth and supporting lower interest rate.
(e) Most people decrease savings to increase current consumption, thereby slowing capital investment, slowing the rate of economic growth and supporting higher interest rate.

(5) (Statement Needed)
(a) A general reduction in the tax rate applied to corporate profits.
(b) The elimination of the investment tax credit.
(c) A reduced emphasis on accelerated depreciation applied to a wide variety of types of capital, particularly building and equipment.
(d) The inclusion of intangible capital in the corporate income tax base.
(e) A contraction of the effective interest rate deduction against taxable corporate income.

(6) An absolute “precondition for growth” is the:
(a) Development of some excess of income over consumption.
(b) Creation of a surplus labour force for employment in manufacturing.
(c) Discovery and exploitation of some internal economics.
(d) Cultural acceptance of free enterprise principles of economic behaviour.
(e) Development of manufacturing to the point where it can begin to supplant agriculture.

(7) If a commodity’s return is in the nature of pure economic rent and a tax is imposed on the commodity, then:
(a) The incidence of tax is born wholly by the suppliers, and price to the buyers will not change.
(b) The incidence is borne wholly by the buyers.
(c) The incidence will be shared between the suppliers and the buyers.
(d) The output of the commodity will fall and its price will rise.
(e) The output of the commodity will not fall but its price will rise.

(8) If a nation’s capital – output ratio gradually increases over time, this indicates that:
(a) The share of capital – owners in total output is increasing.
(b) The diminishing returns stage has not yet been reached with respect to capital.
(c) The marginal physical product of capital must have reached zero.
(d) Technological progress must be improving the productivity of capital.
(e) The law of diminishing returns is operating with respect to capital’s productivity.

(9) A general sales tax, without any exempted commodities, is considered to be:
(a) A progressive tax because it applies to luxuries as well as necessities.
(b) A regressive tax because wealthy people spend a smaller percentage of their total income on taxed commodities, and hence the proportion of payments to income is greater for people.
(c) A progressive tax because wealthy people spend more than poor people.
(d) A regressive tax because more money is collected from a poor person than from a rich one.
(e) A proportional tax because everybody pays the same tax percentage on each purchase.

(10) Given the usual downward – sloping shape of a market demand curve, what should be the effect of a tax that affects only the fixed cost of every firm remaining in a competitive market on the price received and the quantity supplied by each competitive firm?
(a) Price up and quantity up
(b) Price up and quantity down
(c) Price down and quantity up
(d) Price down and quantity down
(e) Price and quantity remain unchanged

(11) Suppose that long term labour contrasts hold the real wage above equilibrium. Which of the following statements would then hold?
(a) Fiscal stimulus would perversely increase the excess supply labour
(b) Monetary stimulus would perversely increase the excess supply labour
(c) Monetary stimulus would be totally ineffective to change the excess supply labour
(d) Fiscal stimulus only would reduce the excess supply labour
(e) Both fiscal and monetary stimulus could reduce the excess supply labour

(12) A substantial fall in the price of Pakistani currency in foreign currencies could be expected to affect physical quantities of exports from Pakistan and imports into Pakistan as follows:
(a) Increase both exports and imports
(b) Increase exports, decrease imports
(c) Decrease both exports and imports
(d) Decrease exports, increase imports
(e) Have no perceptible affect on either imports or exports.

(13) If the marginal utility of a commodity is zero, then:
(a) Total utility for this commodity has reached a maximum.
(b) The commodity in question has no utility, i.e. it is not one that consumers want to use.
(c) The paradox of value must be involved.
(d) The consumer has reached his or her equilibrium position with respect to purchase of this commodity.
(e) Total utility for this commodity must be zero also.

(14) A difference between a tariff on an imported good and a quota on such a good is:
(a) That a quota can never be made to yield revenue for the government, whereas a tariff can.
(b) That a tariff can never be made to yield revenue for the government, whereas a quota can.
(c) That a quota can be used to shut off all, or virtually all, the inflow of the imported good whereas a tariff cannot.
(d) That a tariff can be used to shut off all, or virtually all, the inflow of the imported good whereas a quota cannot.
(e) That a quantity equivalent quota will only generate the same revenue if correctly prices, (for example, by an auction for import licenses.)

(15) The relationship between marginal revenue and the price elasticity of demand is this; when marginal revenue is:
(a) Negative, demand must be inelastic
(b) Zero, demand must be inelastic
(c) Positive, demand must be inelastic
(d) Negative, demand must be unit-elastic
(e) Positive, demand must be perfectly elastic

(16) In a period of deflation (i.e. of generally falling prices), the “real” rate of interest obtained by a lender on money lent:
(a) Will exceed the nominal rate
(b) Will become a negative figure
(c) Will fall below the stated rate, although not to the extent of becoming a negative figure.
(d) Will become a meaningless or incalculable figure
(e) Will be less than the nominal rate.

(17) Suppose that net export were to become more sensitive to change in the interest rate. You would expect to see (with respect to changing output)
(a) Both fiscal and monetary policy become more effective
(b) Both fiscal and monetary policy become less effective
(c) Monetary policies become more effective, while fiscal policy become less effective.
(d) Fiscal policy becomes more effective, while monetary policy become less effective.
(e) Fiscal policy becomes more effective, while monetary policy does not change.

(18) Net exports are most likely to be:
(a) Positively correlated with both interest rates and GNP
(b) Positively correlated with interest rate but fairly independent of GNP
(c) Positively correlated with GNP, but fairly independent of interest rates.
(d) Negatively correlated with GNP, but positively correlated with interest rates.
(e) Negatively correlated with both interest rates and GNP

(19) Trade theory predicts that protectionist measures produce:
(a) Permanent increase in the rate of inflation
(b) Temporary increase in the rate of inflation
(c) Permanent reductions in the rate of inflation
(d) Temporary reductions in the rate of inflation
(e) Temporary or permanent increase in the rate of inflation depending upon (1) whether they are quotas or tariffs and (2) the degree of market power held by domestic supplies in the import competing industry.

(20) When economists speak of investment, they are speaking of:
(a) The part of GNP used by households for current use.
(b) The part of GNP, past and present, that has been set aside to add to productive capacity.
(c) The part of GNP captured in the computation of rupee value of goods butn ot services.
(d) The part of GNP that the government devotes to the construction of roads, airports, and the like.
(e) The part of GNP used by business to add to productive capacity, and by households to add to their stock of new houses.

[huma gillani]

PAPER 2009
COMPULSORY
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (20)

(i) Ceteris paribus is a Latin term meaning:
(a) “one by one”
(b) “equal under the law.”
(c) “other things being equal.”
(d) “in accordance with the law.”

(ii) The slope of a curve is:
(a) constant in the case of a straight line
(b) positive in the case of a direct relationship
(c) negative in the case of an inverse relationship
(d) equal to the change in vertical movement divided by the change in horizontal movement.

(iii) If the quantity of X increases whenever the price of X decreases, one can conclude that:
(a) the relationship between the price and the quantity of X is direct
(b) the relationship between the price and the quantity of X is inverse
(c) the relationship between the price and the quantity of X is linear
(d) the relationship between the price and the quantity of X is nonlinear

(iv) A simultaneous decrease in demand and supply will always result in:
(a) a decrease in the equilibrium price
(b) an increase in the equilibrium price
(c) a decrease in the equilibrium quantity
(d) an increase in the equilibrium quantity

(v) The marginal utility of a good refers to the:
(a) total utility of the good prior to consumption of the last unit
(b) extra utility associated with consuming another unit of the good
(c) utility associated with consuming an alternative good
(d) consumer surplus associated with the consumption of an alternative good

(vi) When a firm is experiencing economies of scale:
(a) the MP curve slopes upward
(b) the LRAC curve slopes downward
(c) diminishing returns to labor have been suspended
(d) the MC curve slopes downward

(vii) Actual GDP may exceed potential GDP for a short period of time when:
(a) the unemployment rate is high
(b) plants run extra shifts that ordinarily are not scheduled.
(c) plants are shut down to remove old equipment and install new equipment
(d) any or all of the above occur.

(viii) An example of frictional unemployment is:
(a) workers at General Motors plants laid off because of slow car sales.
(b) steel workers laid off by plant closings.
(c) a teenager who has quit work at McDonald’s waiting to take a job next week at the car wash
(d) Inner-city welfare mothers taking classes to earn high-school equivalency degrees.

(ix) If inflation is expected to be 5 percent in the coming year and the nominal interest rate is 8 percent, then the real interest rate is:
(a) –3 percent
(b) 3 percent
(c) 8 percent
(d) 13 percent

(x) Which of the following is included in GDP as currently measured?
(a) food stamps
(b) used car sales
(c) additions to inventories
(d) purchases of Ford stock

(xi) Disposable income is:
(a) the same as personal income
(b) income that is used only for consumption
(c) Personal income remaining after income taxes
(d) exclusive of social security payments or welfare.

(xii) The difference between GNP and GDP is:
(a) net factor payments to foreigners
(b) indirect business taxes paid to all levels of government
(c) net exports of goods and services.
(d) capital consumption allowances.

(xiii) A country that makes large net income payments to investors in another country is likely to:
(a) have a large GDP than GNP
(b) have smaller GDP than GNP
(c) grow slower economically than the other country
(d) grow faster economically than the other country.

(xiv) Which of the following would be the best measure of changes in the standard of living in an economy, expressed in a time series?
(a) real GDP
(b) output per labor hour of output
(c) real GDP per capita
(d) nominal GDP per capita

(xv) An MPC of less than 1 means that an increase in current disposable income would cause desired consumption expenditures to:
(a) rise by less than full increase in disposable income.
(b) fall slightly because the increase in income will increase saving.
(c) rise by the full increase in disposable income.
(d) stay the same because the MPS is also less than 1.

(xvi) For money to serve as an efficient medium of exchange, it must have all but which of the following characteristics?
(a) general acceptability
(b) convertibility into precious metals
(c) high value relative to its weight
(d) divisibility

(xvii) A bond that pays interest forever and never repays the principals is called a:
(a) perpetuity
(b) preferred share
(c) fixed-term bond
(d) treasury bill

(xviii) If given the same amount of inputs, U.S farmers produce 2 tons of rice per acre while Japanese farmers produce 1 ton of rice per acre, we can be certain that:
(a) the United Sates should export rice to Japan.
(b) the United States has a comparative in rice production.
(c) the United States has an absolute advantage in rice production.
(d) Japanese farmers must be paid twice as much as American farmers.

(xix) The doctrine of comparative advantage says that there are gains from international trade:
(a) only if both comparative and absolute advantage are present in both countries.
(b) if opportunity costs are the same in the countries involved.
(c) only there are economies of scale available.
(d) if countries specialize in the production of goods in which they are relatively more efficient.

(xx) The terms of trade are measured by:
(a) the quantity of imported goods that can be obtained for each unit of an exported good.
(b) the ratio of the price of imports to the price of exports.
(c) the value of imported goods that can be obtained for each dollar of exported goods.
(d) all of the above.

[huma gillani]

PAPER 2010
(COMPULSORY)
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (20)

(i) The best and comprehensive definition of economic development was presented by:
(a) Higgins
(b) Maddison
(c) Friedman
(d) None of these

(ii) Fishery is the sub sector of:
(a) Agriculture
(b) Manufacturing
(c) Mining
(d) Both (b) and (c)

(iii) Pakistan was the leading exporter before the separation of East Pakistan:
(a) Cotton
(b) Tea
(c) Rice
(d) None of these

(iv) Pakistan devalued its currency in 1972 by:
(a) 131%
(b) 121%
(c) 100%
(d) None of these

(v) Eighth Five Year Plan duration was:
(a) 1983 – 1988
(b) 1993 – 1998
(c) 1978 – 1983
(d) 1988 – 1993

(vi) Export Bonus Scheme (EBS) was introduced in:
(a) 1969
(b) 1979
(c) 1959
(d) 1949

(vii) Primary deficit (primary balance) is the difference between total revenue and:
(a) Non-interest total expenditure
(b) Interest expenditure
(c) development expenditure
(d) All of these

(viii) Cooperative movement was started in sub-continent in:
(a) 1904
(b) 1914
(c) 1934
(d) None of these

(ix) The Ryotwari system was introduced by the British rules in the provinces of:
(a) Sindh, Madras and Mumbai
(b) Sindh, Punjab and Mumbai
(c) Sindh, Madras and NWFP
(d) Both (a) and (b)

(x) Pakistan Agricultural Storage and Service Corporation (PASSCO) was established in:
(a) 1973
(b) 1963
(c) 1953
(d) 1983

(xi) Who developed Physical Quality Life Index (PQLI) in his famous book named by “Measuring the Condition of the World’s Poor: PQLI in 1987?
(a) Morris D. Morris
(b) Higgins
(c) Keynes
(d) None of these

(xii) The Human Development Index (HDI) ranks all countries on the scale of:
(a) 0 to 1
(b) 1 to 100
(c) -1 to +1
(d) None of these

(xiii) The United Nations designated The Fourth World as:
(a) Less developed countries
(b) Poor countries
(c) Least developed countries
(d) All of these

(xiv) According to ‘North-South Divide’, the rich countries are called:
(a) South countries
(b) North countries
(c) Industrialized countries
(d) Advance countries

(xv) The loan which is given at a nominal rate of interest ranging from 1% to 3% is called:
(a) Hard loan
(b) Conditional loan
(c) Soft loan
(d) All of these

(xvi) The accumulation of a stock of debt so large as to threaten the country’s ability to repay its past loan:
(a) Debt equity swap
(b) Debt trap
(c) Debt overhang
(d) None of these

(xvii) “Rabi” season which begins in:
(a) April-June
(b) October-December
(c) January-February
(d) None of these

(xviii) Government of Pakistan announced privatization policy in:
(a) 1981
(b) 1995
(c) 1991
(d) None of these

(xix) The floating debt (short-term) consists of:
(a) Treasury Bills
(b) Market Treasury Bills
(c) MTBs for Replenishment
(d) All of these

(xx) The currency of IMF is called:
(a) SDRs
(b) ODRs
(c) Lira
(d) None of these