Fiscal and Monetary Policy, Inflation, Cost and Supply, Economical Development, Natural Resources Roots and Theories, Regional Trading MCQs

1 - In 2003, the UN Development Program estimated that a 1-percent LDC per capita consumption growth, with income inequality unchanging, would reduce the poverty percentage by _________ percent yearly?






2

2 - A value of 1 in Gini index represents ?






maximum inequality

3 - Indices of income distribution measure ?






relative poverty

4 - _________ is below the income that secures the bare essentials of food clothing and shelter ?






Absolute poverty

5 - A government might use tax to ?






Discourage consumption of merit goods

6 - In a regressive tax system ?






The average rate of tax falls as income increase

7 - If the economy grows the government's budget position will automatically ?






worsen

8 - If the marginal rate of tax is 40% and consumers income increase from Rs10,000 to Rs12,000 ?






The total tax paid will be Rs4,800

9 - A reflationary (expansionist) fiscal policy could include ?






Increased lending by the banks

10 - Over-funding is when the State Bank of Pakistan ?






sells more government bonds than are required to finance the PSBR

11 - If the State Bank of Pakistan wished to pursue a tight monetary policy it would ?






buy government securities on the open market

12 - Goodhart's Law suggests that ?






controlling one part of the money supply will merely result in that item becoming less important

13 - As the required reserve ratio is decreased the money multiplier ?






increase

14 - The parable of Riding a Switchback suggest that stabilizing policy ?






is stimulating or contracting the economy at the wrong times

15 - The implementation lag for monetary policy is generally ?






much shorter than it is for fiscal policy

16 - The budget deficit tends to decrease then ?






GDP increase

17 - Automatic stabilizers act to ______ government expenditures and _______ government revenue during an expansionary period?






decrease; increase

18 - Net taxes are ?






Taxes paid firms and households to the government minus the transfer payments made to firms and household

19 - As an economy grows ?






The government's budget position should automatically worsen

20 - The public Sector Net Cash Requirement (PSNCR) is ?






A measure of the country's budget position

21 - The marginal rate of tax paid is ?






Change in the tax paid / change in income

22 - Imagine there is no tax on income up to Rs 1000 after that there is a tax of 505 what is the average tax rate on an income of Rs 20,000 ?






0.2

23 - Fiscal drag occurs when ?






Tax bands do not increase with inflation

24 - By controlling the monetary base economists mean ?






making banks keep a certain % of their assets as M0

25 - If the state Bank of Pakistan wished to pursue an expansionary monetary policy it would ?






buy government securities on the open market

26 - By financial crowding out economist mean ?






government borrowing drives up interest rates

27 - The idea that the money supply should change to accommodate changes in aggregate demand is associated with the idea of ?






Milton Friedman

28 - The multiple by which total deposits can increase for every pound increase in reserves is the ?






Money multiplier

29 - The response lag of stabilization policy represents ?






the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented

30 - Time lags which often erode effectiveness of monetary and fiscal policy measures represent ?






delays in the response of the economy is stabilization policy

31 - The negative effect on the economy that occurs when average tax rates increase because taxpayers have moved into higher income brackets during an expansion is ?






the Laffer curves

32 - Automatic stabilisers act to ____ government expenditures and ____ government revenues during recessions ?






increase; decrease

33 - Fiscal Policy refers to ?






The spending and taxing policies used by the government to influence the economy

34 - The abolition of income tax would probably ______ the number of workers in employment and _______ the equilibrium rate of unemployment?






increase reduce

35 - Policies to reduce unemployment by reducing union power, tax cuts, reductions in unemployment benefit and investment subsidies are examples of ?






Supply-side policies

36 - The equilibrium rate of unemployment at any real wage, is the difference between ______ and ______?






those willing to work at the going wage labor supply

37 - A person who is made redundant because of the contraction of an industry is a victim of ?






structural unemployment

38 - The Short run Phillips curve can shift in response to changes in ?






Inflationary expectations

39 - The Phillips curve shows the trade-off between _____ and _____?






the inflation rate, the unemployment rate

40 - During Periods of rising inflation and rising interest rates we expect the demand for real cash to ?






rise

41 - The quantity theory of money says that changes in ____lead to equivalent changes in ____ but have no effect on ______?






nominal money, the price level, output and employment

42 - Expansionary fiscal policy in the classical model will cause aggregate demand to _______ potential output?






remain equal to

43 - At the intersection of AD and AS equilibrium is achieved in ?






all of these

44 - In the classical model, potential output cannot be increased by ?






monetary growth

45 - The AD schedule indicates that _______ inflation is associated with ________ output?






higher, lower

46 - All the following are types of monetary policy expect ?






a balanced budget

47 - The relative-wage explanation for the existence of downwardly sticky wages emphasizes ?






the contention that workers in one industry may be unwilling to accept a wage cut unless they know that workers in other industries are receiving similar cuts

48 - When economists use the term real business cycle theory they are suggesting that business cycles are caused by ?






Shifts in aggregate supply

49 - Doubts about the natural and the existences of the Phillips curve arose in the 1970s when the economy experienced ?






simultaneously high rates of inflation and unemployment

50 - If input price prices adjusted very rapidly to output prices as classical economists argue the Philips curve would be ?






Vertical or nearly vertical

51 - The Phillips curve indicates that there is a ?






negative relationship between the inflation rate and the unemployment rate

52 - Potential GDP is the level of aggregate output ?






that can be sustained in the long run without inflation

53 - In the long run, the Phillips curve will be vertical at the natural rate of unemployment if ?






the long run aggregate demand curve is vertical at potential GDP

54 - According to the classical economists, those who are not working ?






have chosen not to work at the market wage

55 - The classical view of the labor market is basically consistent with the assumption of _________ aggregate supply curve?






a vertical (or almost vertical)

56 - Possible causes of involuntary unemployment are ?






all of the above

57 - If the income tax rate changes from 30% to 40% on income over Rs30,000 and a person's income is Rs 31,000 then her marginal tax rate is ?






0.4

58 - If somebody is prepared to work at the going wage rate but cannot find work then they are victims of ?






voluntary unemployment

59 - We would normally expect the size of the labor force to be _____ than the number or workers willing to accepts job offers at any real wage rate ?






Larger

60 - An advocate of the classical model of the economy would claim that unemployment is created when the ____ is above its equilibrium level in the ______?






wage rate, labor market

61 - The costs of inflation are ?






all of the above

62 - The long-run Phillips curve is ____ at the ____?






vertical equilibrium rate of unemployment

63 - Governments may contribute to inflationary pressure because of building up large ?






budget deficits

64 - In the events of an increase in the international price of oil that encouraged the central bank to accept lower real interest rates, inflation would most likely ?






increase

65 - The Keynesian model is a good guide to ____ behavior and the classical model describes behavior in ______?






short-term long run

66 - The equilibrium inflation rate is determined by the intersection of _____ and _____?






AD, AS

67 - If a person thinks they are better off after a 10% wage increase, and all prices have risen 10% then they are experiencing ?






inflation illusion

68 - The classical model of macroeconomics assumes ?






B and C

69 - Even though explicit contracts may lead to layoffs during recessions explicit contracts may still be efficient because such contracts ?






minimize negotiation costs

70 - An unspoken agreement between workers and firms that the firm will not cut wages is known as ?






an implicit or social contract

71 - The expectations augmented Phillips curve was the Work of which group of economists ?






Monetarists

72 - The view of the Phillips curve that prevailed in the 1960s implied that policies that ?






lower unemployment rate will tend to raise the inflation rate

73 - The Phillips curve is a graph showing the relationship between ?






the inflation rate and the unemployment rate

74 - Which school of economic thought suggested that one possible cause of inflation was a ‘push' from the cost side ?






Keynesian.

75 - The measured unemployment rate can be pushed below the natural rate, but ?






only in the short run, and not without inflation

76 - The natural rate of unemployment is generally thought to be the sum of ?






frictional unemployment and structural unemployment

77 - Those who hold the classical view of the labor market are likely to believe that ?






neither monetary nor fiscal policy will have an effect on output and employment

78 - one of the tenets of the classical view of the labor market is that the wage adjustments that are necessary to clear the labor market occur ?






quickly

79 - For a competitive firm, its short run supply curve is ______ and its long run supply curve is _____?






SMC above SAVC, LMC above LAC

80 - In the short run a firm will produce zero output if ?






price is less than short run average variable cost

81 - Short run average total costs are equals to the sum of ____ and _____?






Short run average variable costs, profit run average fixed costs

82 - When average cost is falling marginal cost is ________ and when average cost is rising marginal cost is?






less than average cost, greater than average cost

83 - If a long run average cost curve is falling form left to right this is an example of ?






increasing returns to scale

84 - In monopolistic competition ?






There is one seller

85 - If a firm takes over a competitor then, according to porter's 5 forces model ?






Supplier power is higher

86 - In monopolistic competition of firms are making abnormal profit other firms will enter and ?






The marginal cost will shift outwards

87 - Which of the following is not one of the four Ps in marketing ?






Product

88 - In monopolistic competition ?






The marginal revenue is below the demand curve and diverges

89 - in long-run equilibrium in a competitive market, firms are operating at ?






all of these answers are correct

90 - If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be ?






upward sloping

91 - In the long-run some firms will exit the market if the price of the good offered for sale is less than ?






average total cost

92 - A grocery store should close at night if the ?






variable costs of staying open are greater than the total revenue due to staying open

93 - In the short run, the competitive firm's supply curve is the portion of the marginal cost curve that lies above the average variable cost curve?






portion of the marginal-cost curve that lies above the average variable cost curve

94 - The competitive firm maximize profit when it produces output up to the point where ?






marginal cost equals marginal revenue

95 - If a competitive firm doubles its output its total revenue ?






doubles.

96 - Which of the following is not a characteristic of a competitive market ?






Firms generate small but positive economic profits in the long run

97 - In the long run in perfect competition ?






price = average cost = marginal cost

98 - In perfect competition ?






There are many buyers and sellers

99 - In perfect competition ?






Short run abnormal profits are competed away by firms entering the industry

100 - In perfect competition ?






The products firm offer is very similar

101 - In perfect competition ?






The price equals the marginal revenue

102 - A competitive firm produces a level of output at which ?






price equals marginal cost

103 - A competitive firm demand curve is ?






Horizontal

104 - For perfect competition to work there must be ?






all of the above

105 - In a competitive industry each buyer and seller ?






is a price taker

106 - Holding all factors constant except one and increasing a variable factor is expected to lead to steadily decreased marginal product of that factor, this is an example of ?






The law of diminishing returns

107 - The short run marginal cost curve cuts the short run total cost curve and short run average variable cost curve ?






At their lowest points

108 - The firms long run output decision will be where ?






marginal revenue equals long run marginal cost

109 - If a firm is not operating at the output necessary to achieve all scale economies, it has not achieved its ?






Minimum efficient scale

110 - Decrease returns to scale means that _____ as ______?






long run average cost rises, output rises

111 - A production is technique is technically efficient if ?






there is no way to make a given output using less of one input and no more of the other inputs

112 - In marketing "USP" stands for ?






Unique Selling Proposition

113 - In Porter's five force model conditions are more favorable for firms within an industry if ?






Substitute threat is high

114 - Effective branding will tend to make ?






Supply more income elastic

115 - In monopolistic competition firms profit maximize where ?






Marginal revenue = Average cost

116 - In monopolistic competition ?






There are barriers to entry to prevent entry

117 - If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause ?






an increase in the number of firms in the market but no increase in the price of the good

118 - If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be ?






perfectly elastic

119 - The long-run market supply curve ?






is always more elastic than the short-run market supply curve.

120 - In the long run, the competitive firm's supply curve is the ?






portion of the marginal cost curve that lies above the average total cost curve

121 - If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost the firm could increase profit if it ?






increased production

122 - For a competitive firm, marginal revenue is ?






equal to the price of the good sold

123 - Which of the following market would most closely satisfy the requirements for a competitive market ?






milk

124 - For a perfectly competitive firm ?






Price equals marginal revenue

125 - In the short run firms in perfect competition will still produce provided ?






The price covers average variable cost

126 - In the long run in perfect competition ?






Firms are productively efficient

127 - A profit maximizing firm is perfect competition produces where ?






Marginal revenue equals marginal cost

128 - Firms in perfect competition face a?






perfectly elastic demand curve

129 - Based on the 2010 population survey four of the five most populous countries include ?






China, India, Indonesia, and Brazil

130 - ASEAN refers to the ?






Association of South East Asian Nations

131 - Two countries that still rely on the Soviet communist model of development are ?






Cuba and North Korea

132 - Which two countries have enjoyed a real per capita growth rate of more than 7% yearly since the 1960s ?






Taiwan and South Korea

133 - Why has modern economic growth mainly been in western countries ?






the rise of capitalism

134 - More than seventy percent of the population of fast g: owers lives in ?






China

135 - Korea's keirestsu-like corporate conglomerates is known as ?






chaebol

136 - Keiretsu refers to ?






groups of affiliated companies loosely organized around a large bank

137 - The 1993 World Bank study entitled The East Asian Miracle identifies eight high performing Asian economies. Which of the following is not one of them ?






Vietnam

138 - Based on Mankiw Romer and Weil (1992) with conditional convergence holding fertility rates, education and government spending as a share of GDP constant ?






income per capita in poor countries grows faster than in rich countries

139 - The bourgeoisie refers to ?






the capitalist and middle class

140 - Perestroika in the former Soviet Union refers to ?






economic restructuring by Gorbachev

141 - On what did the Russian Soviet development model of growth not depend ?






markets for allocating resources

142 - The 1993 World Bank study entitled The East Asian Miracle (1993) identifies eight high performing Asian economies Which of the following is not one of them ?






Vietnam

143 - Asian tigers or newly industrializing countries (NICs) of East and Southeast Asia include the following except ?






China

144 - How has the relative gap between GNP per capita for Western Europe and GNP per capita for African less-developed countries changed from the late nineteenth century to the present ?






increased

145 - UK GDP would exclude which of the following ?






Copper purchased by tap manufacturer Bristan

146 - Real GDP is measured in __________ prices while nominal GDP is measured in _________ prices?






base year; current year

147 - If a cobbler buys leather for Rs100 and thread for Rs50 and uses them to produce and sell Rs500 worth of shoes to consumers the contribution to GDP is ?






Rs500

148 - Gross Domestic Product is the sum of the market value of the ?






final goods and services

149 - Gross Domestic Product can be measured as the sum of ?






Net National Product Gross National Product, and Disposable personal income

150 - The value of plant and equipment worn out in the process of manufacturing goods and services is measured by ?






depreciation

151 - A higher GDP per capita may not means that the quality of life has really improved because ?






It measures wealth not income

152 - To adjust from Gross National Product to Net National Product ?






Deduct subsidies

153 - In a boom ?






Supply will increase immediately to match demand

154 - The standard of living is often measured by ?






Real GDP per capita

155 - Net National Product equals ?






Gross National Product minus depreciation

156 - If your grandparents buy a newly built retirement home, this transaction would affect ?






investment

157 - How is your purchase in Pakistan of a Rs40,000 BMW automobile that was produced entirely in Germany recorded in the Pakistan's GDP accounts ?






Consumption in increase by Rs40,000 and net export decreases by Rs40,000

158 - If Pakistan's GDP exceeds Pakistan's GNP, then ?






foreigners are producing more in the Pakistan then Pakistanis are producing in foreign countries

159 - GDP would include which of the following ?






consulting services

160 - If nominal GDP in 2005 exceeds nominal GDP in 2004, then the production of output ?






may have risen fallen, or stayed the same because there is not enough information to determine what happened to real output

161 - Pakistan's Gross Domestic Product (in contrast to Gross National Product) measures the production and income of ?






The domestic manufacturing sector only

162 - Which of the following would be excluded from UK GDP fro 2005? The sale of ?






a haircut

163 - An example of a transfer payment is ?






unemployment benefits

164 - In a recession a government ?






Is likely to want to increase supply in the economy

165 - To adjust GDP from market prices to factor cost ?






Subtract subsidies

166 - GDP plus net property income from abroad equals what ?






GNP

167 - In a recession ?






Growth is slow

168 - Gross National Product equals ?






Gross Domestic Product adjusted for inflation

169 - The Club of Rome Study, The Limits to Growth suggests that as natural resources diminish ?






costs rise, leaving less capital for future investment

170 - The green house effect is the phenomenon by which ?






the earth's atmosphere traps infrared radiation

171 - Many environmental resources are public goods, which are characterized by ?






nonrivalry and nonexclusion in consumption

172 - According to Coase's theorem when property rights are well defined and legally enforceable and transactions costs are not prohibitive ?






participants will organize their transactions

173 - Micheal Roemer's three-sector model shows that growth in the booming export sector I- reduces the price of foreign exchange II- retards other sectors' growth by reducing incentives to export other commodities III- reduces incentives to replace domestic go






I, II , III only IV

174 - Which of the following country has 25 percent of the world's estimated oil reserves and the lowest cost production as well as a dominant role in OPEC pricing ?






Saudi Arabia

175 - The government levying taxes on polluters or charging a surcharge for pesticide use are ?






internalization of negative spillover effects

176 - Air pollution from automobile exhausts, and water pollution steel plants are examples of ?






negative externalities

177 - Land and natural resources are considered ?






non-producible

178 - The Genuine Progress indicator is ?






also known as index of Sustainable Economic Welfare per capita

179 - The Montreal Protocal, signed in 1987 and strengthened in 1990 ?






reduces ozone depletion through the cutting of chlorofluorocarbon production

180 - Biodiversity ?






includes genetic species ecosystem and functional diversities

181 - Irreversibility refers to ?






natural resource that cannot be reproduced in the future if we fail to preserve them now

182 - The essential difference between capitalism and socialism is that ?






capitalism relies on the market to make economic decisions and socialism uses central planning

183 - What is Baran's explanation for underdevelopment in Asia, Africa, and Latin America ?






All of the above

184 - OECD stands for ?






Organization for Economic Cooperation and Development and Development

185 - For Rosentein Rodan a major indivisibility is in ?






infrastructure

186 - The Vicious circle theory indicates that ?






poverty perpetuates itself in mutually reinforcing circles on supply and demand sides

187 - The regarding the new classical macroeconomics is hoe realistic is the assumption ?






of rational expectations.

188 - It is difficult to determine if the velocity of money is constant over time because ?






whether velocity is constant or not may depend on how the money supply is measure.

189 - The quantity theory of money implies that a given percentage change in the money supply will cause ?






an equal percentage change in nominal DGP.

190 - People are said to have rational expectations if they ?






Use all available information in forming their expectations.

191 - The hypothesis that people know the true model of the economy and that they use this model to form their expectations of the future is the ?






Rational-expectations hypothesis

192 - The nation that the government can establish the macroeconomic is known as ?






fine tuning

193 - According of Keynes, the level of employment is determined by ?






the level of aggregate demand for goods and services

194 - According to classical models, the level of employment is determined primarily by ?






prices and wages

195 - The economists who emphasised wage flexibility as a solution for unemployment were ?






classical economists.

196 - A group of modern economists who believe that institutional factors and confidence strongly influence business behaviour and that expanding demand will usually increase output rather than prices are the ?






post-keynesians

197 - A group of modern economists who believe that markets clear very rapidly and that expanding the money supply will always increase prices rather than employment are the ?






new classical school

198 - New classical theories were an attempt to explain ?






the stagflation of the 1970s

199 - If the demand for money depends on the interest rate the velocity of circulation is ?






not constant and the quantity theory of money does not hold.

200 - The persistence of a phenomenon such as unemployment, even then its causes have been removed is called ?






hysteresis.

201 - The rational-expectation hypothesis suggests that the forecasts that people make concerning future inflation rates ?






are correct on average, but are subject to errors that are distributed randomly

202 - Rapid increase in the price level during periods of recession of high unemployment are known as ?






stagflation

203 - The government increase government spending to try to reduce unemployment This is an example of ?






fine tuning

204 - Keynesian economics became popular because it was able to explain ?






The prolonged existence of high unemployment during the Great depression

205 - According to the classical economists the economy ?






is self-correcting.

206 - Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are ?






sticky prices

207 - Criticisms against the North American Free Trade Agreement include all of the following except ?






wages in the United States will rise relative to Mexican wages

208 - Trade creation will more likely outweigh trade diversion for Country X that forms a customs union if the level of tariffs in Country X prior to the customs union is ________ and the total number of countries forming the customs union is _________?






relatively high; relatively large

209 - A positive, dynamic effect of economic integration is illustrated by ?






economy-of-scale effect

210 - _________ is said to exist when the formation of a regional trading group leads to an expansion of trade above pregroup levels ?






trade creation

211 - ________ is said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries in favor of member countries ?






trade diversion

212 - If A forms a customs union with C, the value of trade diversion will be ?






0

213 - If A imposes a per unit tariff of $10 on imports from both B and C A will import ?






200 units from C

214 - Trade diversion takes place when ?






economic integration results in a shift in product origin from a lower-cost, nonmember country to a member country having higher costs

215 - The implementation of a common market involves all of the following except ?






a common tax system and monetary union

216 - As of 2002, the ________ became the official currency union of the European Monetary System ?






euro

217 - The implementation of the European Union has ?






made it harder for Americans of compete against the Germans in the British market

218 - The European Union is an example of a/an ?






common market

219 - The European Union has achieved all of the following except ?






adopted a common fiscal policy for member nations

220 - Under the EU's Common Agricultural Policy, a variable import levy equals the ?






amount the which the EU's support price exceeds the world price

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