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Old Monday, April 18, 2005
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Default Economics


NOTE: Attempt FIVE questions in all, including Question No.8 which is Compulsory. All questions carry equal marks.

1. Explain the Law of Demand in simplest terms. Briefly describe some of its major non-price determinants. What happens when one or more of the determinants of demand should change?

2. What is Gross Domestic Product, at factor cost, and how is it measured? What are the main elements which differentiate it from Gross National Product, at market prices?

3. How effective can monetary policy be in bringing about economic stability? What are its shortcomings? Why have open market operations evolved as the primary means of controlling commercial bank reserves?

4. Explain graphically how the equilibrium output level in an economic system would be determined by the aggregate demand-aggregate supply approach. In this context, explain the difference between planned saving and investment and realized savings and investment, and why is this distinction significant?

5. Comment upon-the size and causes of public debt. How does domestic debt differ from foreign’ debt? What would be the likely impact of retiring domestic debt?

6. As a world-wide experience, high import tariff has been used liberally in support of infant industry argument ~to protect domestic industry. Discuss the practical implications of reducing import tariff to lowest levels especially in the developing countries like Pakistan under auspices of WTO agreements.

7. Write short notes on the following:

(a) Likely impact of on-going polices of economic and trade liberalisation in terms of growth, employment and poverty alleviation.

(b) Discuss "Regionalism and its compatibility with Globalisation of the world economies in the light of recent developments in the world at large.

(c) Does the IMF package of structural reforms which is more or less similar for all developing countries, benefit the recipient country more than hurts it? Discuss.


3. Write only the correct answers in the Answer Book. Don’t reproduce the questions.

(1) A firm’s monopolistic position is strengthened by:

(a) Low elasticity of demand for its product.

(b) High elasticity of demand for its product.

(c) Constant elasticity of demand.

(d) None of the above.

(2) The overall Budget Deficit is financed from:

(a) External borrowing

(b) Non-Bank borrowing domestically

(c) Bank borrowing plus the above two at (a) and (b)

(d) None of the above.

(3) Devaluation leads to:

(a) Increase in imports (b) ‘ Increase in exports
(c) Decline in imports (d) Nona of the above.

(4) guild-up ‘of Foreign exchange reserves leads to:

(a) Decrease in money supply

(b) Increase in money supply

(c) Contraction in money supply

(d) None of the above.

(5) . monopolist would maximize profit at that level’ of production where:

(a) His/her average cost of production equals his/her marginal revenue

(b) marginal cost of production equal marginal ‘revenue

(c) Average cost equal average revenue

(d) None of the above.

(6) Cost push inflation results from: -

(a) Enhancement in wage bill

(b) Increase in the cost of inputs going into product ion

(c) Increase in the international prices of imports

(d) None of the above.

(7) Balance of trade deficit refers to:

(a) Difference between receipts from exports of goods and services and the, payments for imports of goods and services.

(b) Difference between commodity export earnings versus payment for commodity imports.

(8) Health of a country’s economy is indicated by:

(a) Number of doctors per 1.000 population

(b) Per capita income

(c) Literacy rate (d) None of the above.

(9) According to classical theory of employment Laissez Faire System of enterprise:

(a) Ensures continuous Full - Employment

(b) Leads to general over production

(c) Leads to investment higher than savings,

(d) None of the above.

(10) Saving means:

(a) Part of income for investment

(b) Income for boarding

(c) Non-consumption of income in the current period

(d) None of the above.

(11) Thee eziee of GDP in nominal terms refer to:

(a) Natioal, output iz~ ~a]. te~m~

(b) National output in prices prevaiLing in market

(c) Output at constant prices

(d) None of the above.

(12) Rs. 100 note has value because:

(a) It has intrinsic value

(b) State Bank guarantees it

(c) Its holder can exchange it for goods and services

(d) None of the above.

(13) In 25 years (1960-85) Pakistan’s Per Capita income:

(a) More than doubled (b) Less than doubled

(c) Did not show more than 70% increase (d) None of the above.

(14) All economic models’are based on:

(a) Realistic assumptions

(b) Assumptions which can never be perfectly realistic

(c) Unrealistic assumptions

(d) None of the above.

(15) Terms of Trade improvment if:

(a) Unit value of i#t~Orts goes d6wn

(b) Unit value of 6*~rts go up

(c) Relative value b~ exports ~O higher thäi’~ that of imports

(d) None of the abO~V6.

(16) An important policy instrument tO influence commercial banks is:

(a) Open market operations

(b) Changing reserve ratios of co~tnercial ba~riks

(c) Moral persuasion

(d) None of the above.

(17) Expansion in money supply stems f torn:

(a) Increasing the cost of bank credit

(b) Reducing availability of bank credit

(c) Reducing the financial cost of bank credit

(d) None of the above.

(18) During the 1980’s empirical evidence indicates that:

(a) Poverty re-emerged in Pakistan

(b) Good growth brought down poverty in Pakistan

(c) Poverty situation showed no change

(d) None of the above.

(19) Expansion in international trade is preferable over;

(a) Foreign aid (b) Project assistance

(c) Commodity assistance by foreign donors (d) None of the above.

(20) Supply factors in economic growth, are:

(a) Manpower (b) Stock of capital
(c) Technology and skills (d) None of the above
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Default Economics 2003

Economics 2003 , PAPER-2


NOTE: Attempt FIVE questions in all, including Question No.7
which is Compulsory. All questions carry equal marks.
1. Trace the reasons for economic slow down in the country over the, last, few years and come up with possible remedial measures.

2. Going through the overall dismal record of. Pakistan’s planned developmental efforts, should we conclude that long or medium term planning in Pakistan is a futile exercise. Discuss.

3. It is alleged that the nationalization of early 1970’s was a disaster for the Pakistan’s economy. How do you look at this issue of nationalization?

4. Keeping in view the experience of Ayub era, it looked as it growth and distribution had virtually, no ‘relationship in Pakistan. The latest experience has, however, made people to reconsider this relationship. Discuss.

5. Over the last few years, it has been proved that it is the agriculture sector which has kept the Pakistani’s economy alive. Elaborate this statement and identify the future prospects in the sector.

6. Write notes on the followings:

a) Balance of Payment situation in Pakistan.

b) Unemployment Problem in Pakistan.


7. Write only the correct answers in the Answer Book. Don’t’ reproduce the questions.

(1) If production in Pakistan’s Agriculture is subject to Law of diminishing returns, then to obtain successive’ increases in output of one extra unit.

(a) Smaller and smaller amounts of the variable input will be needed.

(b) Adding more of the variable input will do more harm than good because it must diminish total output instead of increasing it.

(c) The total cost of hiring each additional unit of the variable input must steadily increase.

(d) Greater and greater amount of the variable input will be needed.

(e) None of the above is necessarily true.

(2) The Law of downward sloping demand says that:

(a) An excess of supply over demand will cause a reduction in Price’.

(b) As people’s income increase they normally buy more of a commodity.

(c) When price falls quantity bought’ normally increases.

(d) Quantity bought of any good will ultimately decline as it goes out of fashion or is replaced by something better.

(3) In a "lorenz-curve diagram absolute equality in income distribution would appear as:

(a) A curved line well bowed out from the diagonal.

(b) A curved line close to the diagonal.

(c) A rights angled line.

(d) A diagonal line.

(e) None of the above.

(4) A Government's fiscal policy would properly be defined as it’s policy with respect to:

(a) The relation between the total of it's purchases of goods and services and the total of it’s welfare payments.

(b) Regulation and control of banking and credit.

(c) The total and types of it’s expenditure, and the manner of financing these e expenditures.

(d) That part of Government operation whose services are sold to the public.

(e) None of the above.

(5) Corporation income (profits tax is defined as a tax levied on:

(a) All dividends paid to stock holders.

(b) The value added production by each corporation.

(c) The corporation's total net sales.

(d) Additions to corporate retained earnings.

(e) Dividends paid plus undistributed profits.

(f) All of the above.

(6) In Pakistan the largest item of non development budget has always been:

(a) Debt servicing.

(b) Defense.

(c) Civil Administration.

(d) Subsidies

(e) none of the above.

(7) In GNP and NNP statistics, "investment" includes:

(a) Any durable product produced through the agency of Government, such as new roads.

(b) Any purchase of a new common stock issue.

(c) Any increase in the amount of year and inventories over their year beginning amount.

(d) Any commodity bought by a consumer but not fully consumed by the year end.

(e) None of the above.

(8) During the last financial year (1999 - 2000) the tax yielding the largest revenue for the Federal Government was:

(a) Income tax. (b) Value added tax.

(c) Excise duty. (d) Customs duty.
(e) Sales tax. (f) Surcharge (petroleum &Gas) (g) Property tax.

(9) If the amount of investment suddenly falls other things being equal:

(a) GNP will begin to fall & continue as such but the ultimate fall will be less than the I fall.

(b) GNP will fall immediately by an amount much greater than the I fall but will show no further tendency to fall.

(c) GNP will fall immediately by an amount less than the I fall.

(d) It is more likely that GNP will rise rather than fall.

(e) GNP will begin to fall and continue as such until it has fallen by an amount considerably greater than the I fall.

(10) Money supply will increase whenever commercial banks:

(a) Increase their deposits with the State Bank.

(b) Increase their loans to the public.

(c) Increase their demand deposit Liabilities by receiving coins or bills from the public as a deposit.

(d) Withdraw part of their deposits from the ‘State Bank.

(e) Reduce their demand deposit liabilities by paying out part of these accounts in the form of coins or paper bills. ‘

(11) The "Marginal efficiency of investment" Schedule means:

(a) A schedule showing how - the total volume of investment spending will change with changes in the interest rate.

(b) A schedule showing how the true rate of interest on an interest bearing security will vary as its market price varies.

(c) An indicator of the extent to which changes in investment spending will change the level of GNP.

(d) An estimate of the rate of profit which any investment project will yield to it’s owner.

(e) None of the above.

(12) If Government increase it’s expenditure with no increase in tax rates, the component parts of GNP are to be affected as follows:

(a) The G (Government) component of, GNP will rise but there will be a partial offsetting reduction in the C component.

(b) G will rise but there is no assured reason for expecting C to rise or to fall.

(c) C will rise and so will C.

(d) C will rise but there is no assured reason for G to rise or fall.

(e) both G and C will fall.

(13) The burden of a large domestic debt is described as follows:

(a) There is no burden at all.
(b) The burden is essentially comparable to that of an
externally held debt. .
(c) There is no direct burden to be borne by future
generation although such generation may have to
bear an indirect burden.’

(d)’’ Although there is an direct burden, it will not be borne by future generations.

(e) By none of’ these.

(14) The most serious objection to the parity pricing program for farm goods has been that:

(a) Most of the benefits ‘have gone to the rich ‘farmers.

(b) It is inconsistent with the policy of improving farm technology and output through research’.
(c) This policy of keeping price above the market or
competitive price has encouraged. resources to star
in agriculture ‘instead of moving towards industry.
(d) The price support program has converted an elastic
demand curve for farm products into an in-elastic

(15) All of’ the following are recognized as aims of agricultural price programs except:

(a) Dampening the fluctuations in agricultural
commodity prices.
(b) Maintaining some purchasing power of agricultural’
(c) Shifting’- the elastic demand for agricultural
(d) Appeasing some politically powerful special
interest groups.

(16) During the last eight years, the per capita income in Pakistan has been: ‘

(a) Increasing substantially because of decline in population growth..

(b) Decreasing. (c). Increasing only marginally. (d) Constant.

(17) Since 1960, the rate of economic -growth’ in ‘the country has been:

(a) On the decline continuously.
(b) Increasing continuously.
(c) Increasing occasionally.
(d) Static in real terms.

(18) The share of manufacturing sector in Pakistan’s GNP is:

(a) 35% (b) 25% (c) 17% (d) 07%

(19) The growth’ in large scale manufacturing during the (July 1999 - March 2000) period was:

(a) 06% (b) 4.7% (c) 03%’ (d) 0%.

(20) The official unemployment rate in Pakistan is:

(a) 15% (b) 10.6% (c) 6.1% ‘(d) 04%.
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can you plz share its answers(MCQS) if possible..
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