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

(i) The best measure of economic development is: (a) GNP (b) HDI (c) PQLI (d) None of these (ii) Due to land reforms of 1972 the number of farmers benefited were around: (a) 50,300 (b) 71,500 (c) 81,201 (d) 40,301 (iii) The best measure of economic development, among the following is: (a) Life expectancy (b) Industrial development (c) Agricultural and industrial development (d) Development of services sector (iv) As per 1990 census, the number of tenants in Pakistan were around: (a) 16% (b) 20% (c) 25% (d) 13% (e) None of these (v) Area irrigated by different sources in Pakistan is around ___________ Million hectares: (a) 17 (b) 20 (c) 15 (d) 18 (vi) Which era (decade) in Pakistan is called the decade lose: (a) 1960s (b) 1970s (c) 1980s (d) 1990s (e) 2000s (vii) The urban employment in the informal industry is: (a) 72% (b) 50% (c) 30% (d) 79% (e) 60.5% (viii) The effective tariff rate in Pakistan (Foreign Sector) is: (a) Below 10% (b) Around 15% (c) Around 20% (d) Around 23% (ix) The major objective of Monetary Authorities is:

(a) To control inflation and help the government (b) Stability of the economy (c) To reduce unemployment and print money (d) To control interest rate and promote investment (e) None of these (x) Out of total reveue of Pakistan, the following percentage is spent on defence and debt services: (a) 50% (b) 30% (c) 90% (d) 80% (e) 70% (xi) Under WTO, Pakistan has bounded tariff for agriculture around: (a) 100% (b) 50% (c) 150% (d) None of these (xii) The best technique to measure competitiveness of trade is: (a) Absolute advantage (b) Comparative advantage (c) Revealed comparative advantage (d) Openness of the foreign sector (xiii) The agricultural share in GDP is around: (a) 22% (b) 20% (c) 15% (d) 10% (xiv) Structural adjustment program in Pakistan led to: (a) Increase poverty (b) Reduce poverty (c) Improve the economy (d) No significant impact (xv) The IMF loans are: (a) For short term (b) For long term (c) Both (a) and (b) (d) None of these (xvi) Indirect taxes are around _____________ of the revenue. (a) 70% (b) 80% (c) 85% (d) None of these (xvii) In the last ten years, foreign debt servicing of Pakistan has: (a) Increased (b) Decreased (c) Remained the same

(xviii) With the introduction of reforms in the foreign sector Pakistans competitiveness has: (a) Improved (b) Deteriorated (c) Improved and deteriorated (d) Deteriorated and improved (xix) The industrial share in the GDP is around: (a) 20% (b) 18% (c) 22% (d) 15% (xx) Produce Index Unit is: (a) Per acre total production in a year (b) Per acre production of one crop in one acre (c) Aggregate average production per acre (d) None of these

Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (i) Price effect is a combination of: (a) Income effect and policy effect (b) Income substitution, income and welfare effect (c) Substitution effect plus market effect (d) All of these (ii) Which of the following is true in long run equilibrium for a firm in monopolistic competition? (a) MC = ATC (b) MC > ATC (c) MC ATC (d) None of thes (iii) To represent the whole economy there are: (a) Four markets (b) Three markets (c) Two markets (d) None of these (iv) The long run average cost curve is: (a) U-shaped (b) J-shaped (c) Hyperbola shape (d) Both (a) and (b) (e) None of these (v) Demand curve in monopolistic competition is: (a) Relatively flatter than monopoly (b) Relatively steeper than monopoly (c) Negatively sloped and same as monopoly (d) None of these (vi) The relation between labour units employed and wage rate is shown by:

(a) Value of marginal product of labour [VMP1] (b) Value of average product of labour [VAP1] (c) Negatively sloped marginal productivity curve (d) Both (b) and (c) (vii) A market with few entry barriers and with many firms that sell differentiated products is: (a) Purely competitive (b) Monopoly (c) Monopolistically competitive (d) Oligopolistic Competition (viii) The firms profit will be maximum when its: (a) Marginal cost is greater than marginal revenue (b) Marginal revenue is greater than marginal cost (c) Marginal cost is equal to marginal revenue (d) Both (a) and (b) (ix) General equilibrium represents: (a) Equilibrium of the goods and money market (b) Equilibrium of the goods market (c) Equilibrium of the goods, money and labour market (d) None of these (x) Net exports are always: (a) Positive (b) Negative (c) Balance (d) None of these (xi) When Slope of the Aggregate Expenditure Curve increases; (Keynesian Cross model) (a) National Income will increase (b) National Income will decrease (c) There will be recessionary gap (d) There will be inflationary gap (e) None of these (xii) GNP of a country is: (a) GDP divided by prices (b) GNP GDP (c) GNP Depreciation (d) None of these (xiii) Money is: (a) Currency and Coins (b) Credit cards and drafts (c) Bonds (d) Promissory notes (e) None of these (xiv) Keep in mind Production Possibility Frontier (PPF): (a) All the points on the PPF could be efficient points (b) Production may be chosen inside PPF which will be efficient (c) Production out side the PPF is efficient (d) None of these

(xv) The investment demand curve is always: (a) Negatively sloped (b) Positively sloped (c) Vertical (d) Horizontal (xvi) Real interest rate is: (a) Interest rate divided by prices (b) Interest rate divided by inflation (c) Interest rate minus inflation (d) Interest rate plus inflation (xvii) The consumer will be in equilibrium where: (a) Budget line intersect indifference curve (b) Budget line intersect price line (c) Both (a) and (b) (d) None of these (xviii) When there is Liquidity Trap: (a) Money demand increases interest rate (b) Money demand decreases interest rate (c) Money demand curve is vertical (d) All of these (e) None of these (xix) Due to change in price aggregate demand curve will: (a) Shift to the left (b) Shift to the right (c) None of (a) and (b) (d) Become flatter (xx) Derived demand is: (a) Like demand for shoe maker (b) Like teacher / tutor (c) Like craftsman (d) All of these (e) None of these 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 Worlds 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 countrys 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

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

(i) Demand curve in case of Giffen good is: (a) Negatively sloped (b) Vertical (c) Positively sloped (d) None of these

(ii) Price consumption curve in case of complementary goods is: (a) Downward sloping (b) Vertical (c) Upward sloping (d) None of these (iii) In case of two goods, following utility approach, a consumer is in equilibrium when: (a) MUx/Px = MUy/Py (b) MUx/Px < MUy/Py (c) MUx/Mx > MUy/Py (d) Both (b) and (c) (iv) In short run: (a) Labour is variable (b) Both labour and capital are variable (c) Both labour and capital fixed (d) None of these (v) When MC is equal to AC, the AC: (a) Increases (b) Decreases (c) Remains constant (d) None of these (vi) Normal profit, excess profit and loss of the firm depends on level of: (a) Average costs in short run (b) Total costs in short run (c) Marginal costs in short run (d) All of these (vii) In case of perfect competition, the sellers are: (a) Two (b) A few (c) Very large (d) None of these (viii) The firm is in equilibrium when: (a) Slope of TC = Slope of TR (b) Slope of TC is less than slope of TR (c) Slope of TC is more than slope of TR (d) None of these (ix) The Marginal Revenue Product of labour MRPL is: (a) MR x MP

(b) MR / MP (c) MR MP (d) Both (b) and (c) (x) In case of imperfect competition the MRPL is the: (a) Supply of labour curve (b) Demand for labour curve (c) Both of these (d) None of these (xi) Per Capita Income is calculated as: (a) N.I+Population (b) N.*Population (c) N.I/Population (d) Both (a) and (c) (xii) Gross Domestic Product equals: (a) GNP NFI (b) GNP + NFI (c) GNP indirect taxes (d) Both (a) and (c) (xiii) The deposit multiplier is always: (a) Greater than one (b) Less than one (c) Equal to one (d) None of these (xiv) Money can be a standard of deferred payments only if the value of money itself: (a) Remains stable (b) increases (c) Decreases (d) None of these (xv) The fiscal policy with a deliberate policy action is: (a) Expansionary fiscal policy (b) Concretionary fiscal policy (c) Discretionary fiscal policy (d) All of these (xvi) Trade based on absolute advantage was presented by: (a) Alfred Marshall (b) Adam Smith (c) Lionel Robbins (d) None of these (xvii) According to Keynes, the relationship between money supply and rate of interest is: (a) Negative (b) Positive (c) Indirect (d) None of these (xviii) An object that is generally accepted in exchange for goods and services is called: (a) Standardized money

(b) Medium of exchange (c) Unit of account (d) All of these (xix) The account in balance of payment that consists of all transactions in financial assets is known as: (a) Capital account (b) Current account (c) Official Reserve account (d) None of these (xx) The difference between exports and imports of visible items of a country is called: (a) Budget surplus (b) Balanced budget (c) Balance of trade (d) Both (a) and (c)

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 tomorrows 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

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) Consumers 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) Pakistans 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

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Basic Economics MCQs with Answers

Economics 100 Quiz 1, Fall 2000

1. The fundamental economic problem faced by all societies is: a. unemployment b. inequality c. poverty d. scarcity 2. "Capitalism" refers to: a. the use of markets b. government ownership of capital goods c. private ownership of capital goods d. private ownership of homes & cars 3. There are three fundamental questions every society must answer. Which of the following is/are one of these questions? a. What goods and services are to be produced?

b. How are the goods and services to be produced? c. Who will get the goods and services that are produced? d. All of the above 4. If you were working full-time now, you could earn $20,000 per year. Instead, you are working part-time while going to school. In your current part-time job, you earn $5,000 per year. At your school, the annual cost of tuition, books, and other fees is $2,000. The opportunity cost of completing your education is: a. $2,000 b. $5,000 c. $17,000 d. $20,000 e. $22,000 5. The bowed shape of the production possibilities curve illustrates: a. the law of increasing marginal cost b. that production is inefficient c. that production is unattainable d. the demand is relatively inelastic 6. You have taken this quiz and received a grade of 3 out of a possible 10 points (F). You are allowed to take a second version of this quiz. If you score 7 or more, you can raise your score to a 7 (C). You will need to study for the second version. In making a rational decision as to whether or not to retake the test, you should a. always retake the quiz b. consider only the marginal benefits from of retaking the quiz (four extra points) c. consider only the marginal opportunity costs from taking the quiz (the time spent studying and taking the quiz) d. consider both the marginal benefits and the marginal opportunity costs of retaking the quiz 7. The law of demand states that: a. as the quantity demanded rises, the price rises b. as the price rises, the quantity demanded rises c. as the price rises, the quantity demanded falls d. as supply rises, the demand rises

Economics 100 Quiz #1, Page 2

8. The price elasticity of demand is the: a. percentage change in quantity demanded divided by the percentage change in price b. percentage change in price divided by the percentage change in quantity demanded c. dollar change in quantity demanded divided by the dollar change in price d. percentage change in quantity demanded divided by the percentage change in quantity supplied 9. Community Colleges desired to increase revenues. They decided to raise fees paid by students with Bachelors degrees to $50 per unit because they believed this would result in greater revenues. But in reality, total revenues fell. Therefore, the demand for Community College courses by people with Bachelors degrees must have actually been:

a. relatively inelastic b. unit elastic c. relatively elastic d. perfectly elastic 10. The demand for a product would be more inelastic: a. the greater is the time under consideration b. the greater is the number of substitutes available to buyers c. the less expensive is the product in relation to incomes d. all of the above Answers: D C D C A D C A C C

Economics 100 Quiz #3 Friday, September 22, 2000

1. In the case of agriculture, a. the demand has shifted to the right more than the supply has shifted to the right b. the demand has shifted to the right less than the supply has shifted to the right c. the demand has shifted to the left more than the supply has shifted to the left d. the demand has shifted to the left less than the supply has shifted to the left 2. The agricultural price support program is an example of a. a price ceiling b. a price floor c. equilibrium pricing 3. If there is a price floor, there will be a. shortages b. surpluses c. equilibrium 4. If there is a price ceiling, there will be a. shortages b. surpluses c. equilibrium 5. If there is a price ceiling, which of the following is NOT likely to occur? a. rationing by first-come, first-served b. black markets c. gray markets d. sellers providing goods for free that were formerly not free 6. The goal of a pure market economy is to best meet the desires of a. consumers b. companies c. workers d. the government 7. In a pure market economy, which of the following is a function of the price?

I. provide information to sellers and buyers , II. provide incentives to sellers and buyers a. I only b. II only c. both I and II d. neither I nor II 8. In a market system, sellers act in ____________ interest , but this leads to behaviors in ____________ interest. a. self; self b. self; societys c. societys; societys d. societys; self 9. The law of diminishing (marginal) returns states that as more of a variable factor is added to a certain amount of a fixed factor, beyond some point: a. Total physical product begins to fall b. The marginal physical product rises c. The marginal physical product falls d. The average physical product falls 10. Why is the law of diminishing marginal returns true? a. specialization and division of labor b. spreading the average fixed cost c. limited capital d. all factors being variable in the long-run Answers: B B B A D A C B C C

Economics 100 MW Quiz #3

1. Which of the following is a characteristic of pure monopoly? a. one seller of the product b. low barriers to entry c. close substitute products d. perfect information 2. In pure monopoly, what is the relation between the price and the marginal revenue? a. the price is greater than the marginal revenue b. the price is less than the marginal revenue c. there is no relation d. they are equal 3. In order to maximize profits, a monopoly company will produce that quantity at which the: a. marginal revenue equals average total cost b. price equals marginal revenue c. marginal revenue equals marginal cost d. total revenue equals total cost

4. Quantity Price Total Cost 1 $100 $ 60 2 95 130 3 90 210 4 85 300 5 80 400 This monopolist should produce: a. 1 b. 2 c. 3 d. 4 e. 5 5. Compared to the case of perfect competition, a monopolist is more likely to: a. charge a higher price b. produce a lower quantity of the product c. make a greater amount of economic profit d. all of the above 6. Which of the following is necessary for a natural monopoly? a. economies of scale b. a high proportion of the total cost is the cost of capital goods c. the market is very small d. all of the above 7. Which of the following is true about the way by which SDG&E has been regulated by the PUC? a. SDG&E has been allowed to earn very high economic profits b. The profits of SDG&E are calculated as a percent of the value of the capital goods c. When the demand for electricity would fall, the price of electricity would also fall d. All of the above 8. Which of the following best defines price discrimination? a. charging different prices on the basis of race b. charging different prices for goods with different costs of production c. charging different prices based on cost-of-service differences d. selling a certain product of given quality and cost per unit at different prices to different buyers 9. In order to practice price discrimination, which of the following is needed? a. some degree of monopoly power b. an ability to separate the market c. an ability to prevent reselling d. all of the above 10. In price discrimination, which section of the market is charged the higher price? a. the section with the richest people b. the section with the oldest people c. the section with the most inelastic demand

d. the section with the most elastic demand Answers: A A C C D D B D D C

Economics 100 Quiz #4, Fall 2002

1. Which of the following concepts represents the extra revenue a firm receives from the services of an additional unit of a factor of production? a. total revenue b. marginal physical product c. marginal revenus product d. marginal revenue 2. Workers Quantity Produced 1 15 2 28 3 39 4 48 5 55 6 60 This company is a profit-maximizing firm selling in a competitive product market and hiring in a competitive labor market. It uses semi-skilled labor to produce dampers used in office building ventilation systems. Assume that the current market price per damper is $50 and that the prevailing weekly salary per semiskilled worker is $550. This company should employ ______ workers. a. 2 b. 3 c. 4 d. 5 e. 6 3. The demand for labor is the same as the a. marginal revenue product b. marginal physical product c. marginal cost d. wage 4. The demand for labor slopes down and to the right because of a. the law of demand b. the iron law of wages c. the law of diminishing marginal returns d. economies of scale 5. The demand for labor will be more elastic if: a. there are few substitutes for labor b. there is a short time under consideration c. labor is a large percent of the total cost of production d. the demand for the product is relatively inelastic e. all of the above

6. Skills that can be transferred to other employers are called: a. general skills b. specific skills c. non-pecuniary skills d. all of the above 7. Which skills are most likely to be paid for by the employer? a. General skills b. Specific skills c. Educational skills 8. If worker A earns more in wages than worker B, it could be because: a. The product made by worker A sells for a higher price than that made by worker B b. Worker A uses more capital per worker than worker B c. Worker A has more natural ability than worker B d. All of the above 9. Skills that embodied in a person are called a. Human capital b. Embodied skills c. Physical capital d. Experience skills 10. Treating an individual as typical of a group is the definition of a. pure discrimination b. statistical discrimination c. human capital d. specific skills Answers: C B A C C A B D A B

Economics 100 Quiz #5, Fall 2001

1. If there are 50 firms in a industry, each selling 2% of the total sales, the concentration ratio is: a. 50% b. 2% c. 100% d. 8% 2. When Daimler Benz, maker of the Mercedes, bought Chrysler, the merger was a. horizontal b. vertical c. conglomerate Questions 3 through 10 involve the functions of the government in a world of laissez faire. The functions are the following: A. Create and Enforce the "Rules" B. Promote or Maintain Competition

C. Provide Information D. Provide Public Goods E. Reduce Negative Externalities (External Costs) through regulations or through taxes F. Subsidize Positive Externalities (External Benefits) G. Provide Merit Goods H. Redistribute Income on the Basis of Need For each of the following, choose the letter that best describes the function of government. 3. The government provides anti-trust laws. 4. The government subsidizes the building of new stadiums and arenas. 5. The government provides for military defense. 6. The government has a program of social security to provide a pension for the elderly. 7. The government requires that all gasoline stations post their prices in signs large enough to be seen by a reasonable person from the street. 8. The government requires people to have a smog control device in their cars. 9. The government makes the beach free for everyone 10. The government makes laws that determine certain behaviors that a corporation must engage in and other behaviors that a corporation cannot engage in. Answers: D A B F D H C E G A

Economics 100 Quiz 6, Fall 2002

1. The largest source of tax revenue for the federal government is: a. the personal income tax b. the social security tax c. the property tax d. the sales tax 2. When my income was $100,000, I paid $10,000 in taxes. When my income became $200,000, I paid $40,000 in taxes. My marginal tax rate is: a. 10% b. 20% c. 30% d. 40% 3. The tax is question #2 is:

a. progressive b. regressive c. proportional 4. Which of the following taxes is regressive? a. the federal income tax b. the state income tax c. the sales tax d. the Medicare tax 5. Assume that there are two goods, A and B. In 1996, Americans produced 10 units of A at a price of $10 and 20 units of B at a price of $20. In 2002, Americans produced 20 units of A at a price of $20 and 30 units of B at a price of $30. The Nominal GDP for 2002 is: a. $100 b. $400 c. $500 d. $900 e. $1300 6. Using the numbers in question 5, the Real GDP for 2002 is: a. $400 b. $500 c. $800 d. $900 e. $1,300 7. Which of the following statements is/are true? a. Business Investment Spending occurs when individuals buy stock in the stock market b. Productivity is the United States grew very slowly between 1973 and 1996 c. Because of discouraged workers, the official unemployment rate is too high d. Full employment occurs when there is no frictional unemployment 8. Immediately after a trough, we would expect to have a/an a. peak b. recession c. recovery d. another trough 9. Last week, Martha spent one day cleaning a house. For this, she was paid $50. The rest of the week, she spent looking for a job. Martha would be classified as a. employed b. unemployed c. not in the labor force 10. John lost his accounting job when Montgomery Wards closed its stores in San Diego. He looked for a similar job for ten months before finding an accounting job at Sears. During the month John was unemployed, he was a. frictionally unemployed b. seasonally unemployed c. cyclically unemployed d. structurally unemployed Answers: A C A C E C B C A D

Economics 100 Makeup for Quiz 6

1. Define average tax rate Define marginal tax rate 2. Define progressive tax Define regressive tax Define proportional tax 3. Define indexation 4. Define Nominal Gross Domestic Product (GDP) Define Real Gross Domestic Product (GDP) 5. Define business investment spending 6. Briefly explain how the official unemployment rate is calculated. 7. Define frictional unemployment Define cyclical unemployment Define structural unemployment Define full employment

Economics 100 Quiz #7, Fall 2002

1. Assume that there are only two goods: A and B In the base year, Quantity Price A 10 $1 B 10 $4 In the current year, Quantity Price A 20 $ 5 B 25 $20 The Consumer Price Index (CPI) for the current year is: a. 50 b. 100 c. 200 d. 500 e. 600 2. Which of the following groups is most hurt by unexpected inflation? a. workers with cost of living adjustments in their labor contracts b. homeowners c. people with large debts to pay for their homes and cars d. people with large retirement savings held in savings accounts 3. If the nominal interest rate is 5% and the inflation rate is 2%, the real interest rate is: a. 2%

b. 3% c. 5% d. 7% e. 2 % 4. For which of the following reasons might inflation cause Real GDP to grow slower than it otherwise would? a. Inflation makes everyone poorer b. Inflation reduces the value of consumer debt c. Inflation increases business investment spending d. Inflation decreases savings in financial form 5. Disposable Income is equal to: a. National Income c. National Income Minus Taxes b. Real GDP c. National Income Minus Taxes d. National Income Minus Taxes Plus Transfers 6. Assume that Potential Real GDP equals $10,000. National Income is therefore $10,000. Of this, consumers will pay $2,000 in taxes, save $1,000, and spend $7,000 on consumer goods. Business Investment spending is $2000. In order to avoid recessions and inflation (to have equilibrium), the government should have a: a. balanced budget b. budget deficit of $1000 c. budget surplus of $1000 d. budget deficit of $2000 7. According to Keynes, when the Great Depression started, the government should have: a. done nothing b. decreased the money supply c. had a large increase in government spending d. enacted high tariffs, such as the Smoot-Hawley Tariff 8. If the government lowers taxes by $10 billion, the Real GDP will rise by a. more than $10 billion b. less than $10 billion c. exactly $10 billion 9. Which of the following is an automatic stabilizer? a. unemployment benefits b. spending on education c. defense spending d. net interest 10. Crowding out means that a. a government budget deficit lowers interest rates and causes investment spending to rise b. an increase in marginal tax rates lowers production c. a government budget deficit raises interest rates and causes investment spending to fall d. a government budget deficit raises American exports and lowers American imports

Answers: D D B D D C C A A C

Economics 100 Quiz 8

1. Which of the following IS a function of money? a. medium of exchange b. store of value c. unit of accounting d. all of the above 2. Which of the following is a component of M-1? a. savings deposits b. credit card c. checkable deposits d. gold 3. Which of the following is a NOT component of M-2? a. small time deposits b. money market mutual funds c. stocks d. checkable deposits 4. Which of the following is true about the Federal Reserve System (Fed)? a. it is a system of 12 central banks b. its Board of Governors is elected by a vote of the people c. its main policy-making body is the FDIC d. it accepts deposits from the public and makes loans to businesses e. all of the above 5. An IOU of the Federal Reserve Bank of San Francisco to Bank of America is called: a. discounts b. federal funds c. reserves d. collateral 6. Which of the following is the most liquid? a. a savings account b. a 6 month CD c. a home d. water 7. The monetary base is composed of: a. gold and silver b. currency only c. currency and reserves d. currency and checkable deposits 8. If the monetary base is increased by $1,000 and the reserve requirement is

10% (1/10), by how much will the money supply be increased? a. $100 b. $1,000 c. $5,000 d. $10,000 9. If the Federal Reserve wishes to increase the money supply, it should: a. raise the reserve requirement b. raise the discount rate c. buy Treasury securities in the open market d. all of the above 10. An increase in the money supply will cause interest rates to a. rise b. fall c. remain unchanged

Q:
61. In 2007 Frank N. Stine was rewarded for his late night work and got a 6.5% pay increase, but at the same time the price level (inflation) rose by 3.5 percent. We can conclude that Mr. Stine's nominal income in 2007: A) rose by 3 percent. B) rose by 10 percent. C) rose by 6.5 percent. D) fell by 3.5 percent. 62. With an MPS of .4, the MPC will be: A) 1.0 minus .4. B) .4 minus 1.0. C) the reciprocal of the MPS. D) .4. 63. If Casimiro Aguacates disposable income increases from $1,200 to $1,700 and his level of saving increases from minus $100 to a plus $100, his marginal propensity to: A) save is three-fifths. B) consume is one-fifth. C) consume is three-fifths. D) save is one-fifth. 64. Dissaving occurs where: A) income exceeds consumption. B) saving exceeds consumption. C) consumption exceeds income. D) saving exceeds income. 65. The average propensity to consume indicates the: A) amount by which income exceeds consumption. B) relationship between a change in saving and the consequent change in consumption. C) percentage of total income that will be consumed. D) percentage of a change in income that will be consumed. Use the following to answer question 66. Example of what the table shows: from row one to row two total disposable income goes from 200 to 225, and total consumption goes from 205 to 225.

66. Refer to the above data. The marginal propensity to consume is: A) Not enough information. B) .75. C) .20. D) .80.

67. Assume a machine, which has a useful life of only one year, costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. The expected rate of return on this machine is: A) 7.5 percent. B) 10 percent. C) 15 percent. D) 20 percent. 68. The immediate determinants of investment spending are the: A) expected rate of return on capital goods and the real interest rate. B) level of saving and the real interest rate. C) marginal propensity to consume and the real interest rate. D) interest rate and the expected price level. 69. The equilibrium level of GDP in a private (no government) closed (no net exports) economy is where: A) MPC = APC. B) unemployment is about 3 percent of the labor force. C) consumption equals saving. D) aggregate expenditures equal GDP. 70. The practical significance of the multiplier is that it: A) brings about an equality of planned investment and saving. B) magnifies relatively small initial changes in spending into larger changes in GDP. C) keeps inflation within tolerable limits. D) helps to stabilize the economy. 71. Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: A) 5 percent. B) 10 percent. C) 15 percent. D) 20 percent. 72. The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the: A) real-balances, interest-rate, and foreign purchases effects. B) determinants of aggregate supply. C) determinants of aggregate demand. D) sole determinants of the equilibrium price level and the equilibrium real output. 73. The multiplier is: A) 1/APS. B) 1/APC. C) 1/MPC. D) 1/MPS. Use the following to answer question 74:

74. Refer to the above diagrams. Assume that all curves have shifted as shown by the arrows. A recession is depicted by: A) panel (A) only. B) panel (B) only. C) panel (C) only. D) panels (A) and (B). 75. Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will: A) have a domestic surplus of copper. B) export copper. C) import copper. D) neither export nor import copper.

76. A nation will neither export nor import a specific product when its: A) domestic price (no-international-trade price) equals the world price.

B) export supply curve lies above its import demand curve. C) export supply curve is upsloping. D) import demand curve is downsloping. 77. Tariffs: A) may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). B) are also called import quotas. C) are excise taxes on goods exported abroad. D) are per unit subsidies designed to promote exports. 78. Evidence of a chronic balance of payments deficit (not trade deficit) is: A) a decline in amount of the nation's currency held by other nations. B) an excess of exports over imports. C) diminishing reserves of foreign currencies. D) an increase in the international value of the nation's currency. 79. Countries engaged in international trade specialize in production based on: A) relative levels of GDP. B) comparative advantage. C) relative exchange rates. D) relative inflation rates.

Answer questions 80 and 81 on the basis of the following 2003 balance of payments data (+ and -) for the hypothetical nation of Zabella. All figures are in billions of dollars.

80. Refer to the above data. Zabella's balance on goods and services shows a: A) $5 billion deficit. B) $5 billion surplus. C) $10 billion surplus. D) $15 billion deficit. 81. Refer to the above data. Zabella has a balance of payments: A) deficit of $5 billion. B) surplus of $10 billion. C) deficit of $10 billion. D) surplus of $5 billion.

Use the following table to answer questions 82-83:

82. Refer to the above data, and using year 1 as the base year. From year 3 to year 4, real GDP: A) went up by $50. B) went up by $100. C) went up by $200. D) went up by $300. 83. Refer to the above data, and using year 1 as the base year. From year 3 to year 4, nominal GDP: A) went up by $50. B) went up by $100. C) went up by $200. D) went up by $300.

84. Fiscal policy refers to the: A) manipulation of government spending and taxes to stabilize domestic output, employment, and the price level. B) manipulation of government spending and taxes to achieve greater equality in the distribution of income. C) altering of the interest rate to change aggregate demand. D) fact that equal increases in government spending and taxation will be contractionary.

85. Discretionary fiscal policy is so named because it: A) is undertaken at the option of the nation's central bank. B) occurs automatically as the nation's level of GDP changes. C) involves specific changes in T and G undertaken expressly for stabilization at the option of Congress. D) is invoked secretly by the Council of Economic Advisers. 86. If the MPS in an economy is .4, government could shift the aggregate demand curve leftward by $50 billion by: A) reducing government expenditures by $125 billion. B) reducing government expenditures by $20 billion. C) increasing taxes by $50 billion. D) increasing taxes by $250 billion. 87. Suppose that the economy is in the midst of a recession. Which of the following policies would be consistent with active fiscal policy? A) a Congressional proposal to incur a Federal surplus to be used for the retirement of public debt B) a reduction in agricultural subsidies and veterans' benefits C) a postponement of a highway construction program D) a reduction in Federal tax rates on personal and corporate income 88. A politically liberal economist who favored expanded government would recommend: A) tax cuts during recession and reductions in government spending during inflation. B) tax increases during recession and tax cuts during inflation. C) tax cuts during recession and tax increases during inflation. D) increases in government spending during recession and tax increases during inflation. 89. Which of the following best describes the built-in stabilizers as they function in the United States? A) The size of the balanced-budget multiplier varies inversely with the level of GDP. B) Tax collections automatically fall and transfers and subsidies automatically rise as GDP rises. C) Tax collections and transfers and subsidies all automatically vary inversely with the level of GDP. D) Tax collections automatically rise and transfers and subsidies automatically decline as GDP rises. Use the following to answer questions 90-91:

90. Refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in billions. This diagram portrays the idea of: A) proportional taxation. B) built-in stability. C) a balance budget at all levels of spending. D) discretionary fiscal policy. 91. Refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in billions. If GDP is $400: A) there will be a budget deficit. B) there will be a budget surplus. C) the budget will be balanced. D) the macroeconomy will be in equilibrium. Answer question 92 on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. 92. Refer to the above information. The administrative lag of fiscal policy is reflected in events: A) 1 and 2. B) 2 and 3. C) 3 and 4. D) 4 and 5.

93. If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as: A) a medium of exchange B) a store of value. C) a unit of account. D) an economic investment. 94. In the United States, the money supply (M1) is comprised of: A) coins, paper currency, and checkable deposits. B) currency, checkable deposits, and Series E bonds. C) coins, paper currency, checkable deposits, and credit balances with brokers. D) paper currency, coins, gold certificates, and time deposits. 95. Coins in people's pockets and purses are: A) included in M1, but not in M2. B) included in both M1 and in M2. C) included in M2, but not in M1. D) not part of the nations money supply. 96. Coins held in commercial banks are: A) included in M1, but not in M2. B) included both in M1 and in M2. C) included in M2, but not in M1. D) not part of the nation's money supply. 97. The money supply is backed: A) by the government's ability to control the supply of money and therefore to keep its value relatively stable. B) by government bonds. C) dollar-for-dollar with gold and silver. D) dollar-for-dollar with gold only. 98. If the price index rises from 100 to 120, the value of the dollar: A) may either rise or fall. B) will rise by one-sixth. C) will fall by one-sixth. D) will rise by 20 percent.

Use the following to answer question 99:

99. Refer to the above diagram of the money market. The vertical money supply curve Sm reflects the fact that: A) bond prices and interest rates are inversely related. B) the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes. C) the velocity of money is zero. D) lower interest rates result in lower opportunity costs of supplying money. Use the following to answer question 100:

100. Refer to the above money market diagrams. The asset demand for money is shown by: A) D1. B) D2. C) D3. D) S. 101. An important routine function of the Federal Reserve Bank is to: A) supervise the liquidation of the assets of bankrupt state banks. B) help large commercial banks develop correspondent relationships with smaller commercial banks. C) advise commercial banks as to the most profitable ways of reinvesting profits. D) provide facilities by which commercial banks and thrift institutions may collect checks.

102. To say that the Federal Reserve Banks are quasi-public banks means that: A) they are privately owned, but managed in the public interest. B) they deal only with banks of foreign nations and do not have direct business contact with U.S. banks. C) they deal only with commercial banks, and not the public. D) they are publicly owned, but privately managed. 103. Banks create money when they: A) add to their reserves in the Federal Reserve Bank. B) accept deposits of cash. C) sell government bonds. D) exchange checkable deposits for the IOU's of businesses and individuals. 104. Money is destroyed when: A) loans are made. B) checks written on one bank are deposited in another bank. C) loans are repaid. D) the net worth of the banking system declines.

Answer question 105 on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions.

105. Refer to the above data. The commercial banking system has excess reserves of: A) $9 billion. B) $7 billion. C) $6.1 billion. D) $5 billion. 106. The multiple by which the commercial banking system can expand the supply of money is equal to the reciprocal of: A) the MPS. B) its actual reserves. C) its excess reserves. D) the reserve ratio. 107. A commercial bank can add to its actual reserves by: A) lending money to bank customers. B) buying government securities from the public. C) buying government securities from a Federal Reserve Bank. D) borrowing from a Federal Reserve Bank. 108. Which of the following statements is correct? A) The supply of money decreases when the Federal Reserve Banks buy government securities from households or businesses. B) Excess reserves are the amount by which actual reserves exceed required reserves. C) Commercial banks decrease the supply of money when they purchase government bonds from households or businesses. D) Commercial bank reserves are a liability to commercial banks but an asset to the Federal Reserve Banks. 109. An increase in the legal reserve ratio: A) increases the money supply by increasing excess reserves and increasing the monetary multiplier. B) decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier. C) increases the money supply by decreasing excess reserves and decreasing the monetary multiplier. D) decreases the money supply by increasing excess reserves and decreasing the monetary multiplier. 110. Which of the following best describes the cause-effect chain of a tight money policy? A) A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP. B) A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.

C) An increase in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. D) An increase in the money supply will lower the interest rate, decrease investment spending, and increase aggregate demand and GDP. 111. The interest rate at which the Federal Reserve Banks lend to commercial banks is called the: A) prime rate. B) short-term rate. C) discount rate. D) Federal funds rate. 112. One of the strengths of monetary policy relative to fiscal policy is that monetary policy: A) can be implemented more quickly. B) is subject to closer political scrutiny. C) does not produce a net export effect. D) entails a larger spending income multiplier effect on real GDP. 113. Which of the following actions by the Fed would cause the money supply to increase? A) purchases of government bonds from banks. B) an increase in the reserve requirement. C) an increase in the discount rate. D) sales of government bonds to the public. 114. The U.S. public debt: A) refers to the debts of all units of government--Federal, state, and local. B) consists of the total debt of U.S. households, businesses, and government. C) refers to the collective amount that U.S. citizens and businesses owe to foreigners. D) consists of the historical accumulation of all Federal government deficits and surpluses. 115. The idea of a cyclically balanced budget is for government to: A) balance the economy, not worrying about expansion of the public debt. B) balance the budget over ten-year periods. C) exactly match budget deficits accruing in the recession phase of the business cycle with surpluses occurring in the late recovery phase. D) make sure the full-employment deficit is always zero. 116. An annually balanced budget intensifies the business cycle because tax revenue declines associated with: A) prosperity will require cuts in government spending. B) recession will require increases in government spending. C) prosperity will require cuts in government spending. D) recession will require cuts in government spending. 117. The idea that the basic purpose of the Federal budget is to stabilize the economy regardless of any resulting changes in the size of the public debt best describes: A) a socially optimal budget. B) functional finance. C) a cyclically balanced budget. D) an annually balanced budget. 118. (Based on the tape shown in class). The fundamental equation of monetarism is the equation of exchange, which is (where M = money supply; V = velocity of money; P = the price level; Y = real output or GDP): A) MP = VY B) MV = PY C) MY = VP D) None of the above 119. If a customer makes a $ 100 deposit to his checking account in bank A, the total amount of additional money created in the banking system, after the monetary multiplier has taken its full effect, is: A) $400, if the reserve requirement is 20% B) $400, if the reserve requirement is 25% C) $800, if the reserve requirement is 10% D) $800, if the reserve requirement is 12.5% 120. (Based on the tape shown in class). The equation of exchange is used to argue that changes in the

quantity of the money supply (M): A) have no impact on real GDP in the short run B) have no impact on real GDP in the long run C) have no impact on real GDP in either the short run or the long run D) Monetary policy is really useless