Principles of Economics and Bangladesh Economy (PBE)

Introduction to Economics

1. “Economics is the study of mankind in the ordinary business of life ” – Discuss the statement.
2. “Economics is the science of wealth” – Discuss.
3. “Economics is a science, which studies human behavior as a relationship between ends and scarce
means, which have alternative uses” – L. Robbins. Discuss the definition.
4. Economics is the study of art as well as science. – Explain the statement.
5. Define Economics after Alfred Marshall and discuss the importance of Economics in our day to day life.
6. Compare the definitions of Economics offered by Adam Smith and Lionel Robbins.
7. Discuss the subject-matter of Economics
8. Explain the terms ‘want’ and ‘scarcity’ as understood in Economics.
9. Discuss the importance of multiplicity of wants and scarcity of resources in the study of economics.
10. Discuss the importance of statistics in the study of Economics.
11. Why is it important for a banker to know the basic principles of economics?
12. What is the importance of the study of Economics from the point of view of an ordinary citizen in
general and a banker in particular?
13. Show the relationship between – (i) Economics and Statistics, (ii) Economics and Political Science; and
(iii) Economics and Sociology.
14. What is meant by the phrase “other things remaining the same ” used in the Law?
15. Critically discuss Irving Fisher’s “Quantity Theory of Money”.
16. Why is Economics central to an understanding of the problems of development?
17. Elaborate on the basic economic questions of ‘what ’, ‘how ’, and ‘for whom ’. Give specific examples of
these questions with respect to the use of a country ’s limited resources.
18. Define Economics and discuss the importance of the study of Economics by bankers.
19. Discuss the relationship between Economics and (i) Accounting, (ii) Finance; and (iii) Marketing.

Demand and Supply

20. Why does a demand curve usually slope downward to the right?
21. “If demand increases, both equilibrium price and quantity increase. Again, if supply rises, equilibrium
price and quantity decline.” Explain the statement with the help of a diagram. ” Explain the statement
with the help of a diagram.
22. What do you understand by the Law of Demand and the Law Supply?
23. Are prices always determined by the laws of demand and supply? Explain with reference to the
situation in Bangladesh.
24. State the law of supply and explain why a supply curve usually slopes upward to the right.
25. Show with the help of a diagram how equilibrium price changes as a result of changes in demand and
supply.
26. What is the difference between changes in demand and increase/decrease in demand?
27. Explain with the help of a budget line and indifference curve how a consumer reaches the highest level
of satisfaction.
28. Explain with the help of a diagram how equilibrium of prices is determined by the interaction of
demand and supply.
29. Define supply and indicate the factors that influence supply.
30. What relationship does the price elasticity of demand bear with marginal revenue and average
revenue?
31. What are the main characteristics of an indifference curve?
32. Explain with the help of a budget line and an indifference curve how a consumer reaches the highest
level of satisfaction.
33. What is the price elasticity of demand? State the formula.
34. Show how the quantity demanded of a commodity responds to price changes when (i) demand is
perfectly inelastic, (ii) demand is perfectly elastic, and (iii) elasticity of demand is equal to unity.
35. Use diagrams for each of the cases.
36. Calculate the price elasticity of demand when the price per unit of a product falls from Taka 5 to Taka 4
and the quantity bought rises from 4 units to 5 units as a result.
37. State with the help of diagrams the difference between infinitely elastic demand and infinitely inelastic
demand.
38. State what is meant by – Income elasticity of demand.
39. State and explain the Law of Demand, explain the law with the help of a diagram and indicate the
limitations of the Law.
40. What is the importance of the concept of price elasticity of demand in real life?
41.
42. Calculate the price elasticity of demand when the price of a product rises from Tk. 10 to Tk. 15, causing
a fall in the quantity demanded of the product from 40 to 30.
43. Estimate the price elasticity of demand when the price per unit of a product falls from Taka 5 to 3, and
the quantity purchased rises from 5 units as a result.
44. Describe the determinants of Demand and Supply.
45. Explain some exceptions to the laws of demand and supply.
46. State and explain the law of diminishing marginal utility and discuss its limitations.
47. Show the relationship between the law of diminishing marginal utility and the law of demand.
48. Using formulas, and/or Distinguish between price elasticity of demand and income elasticity of demand.
49. What do you mean by a consumption indifference curve? What are the characteristics of a consumption
indifference curve?
50. Show how a consumer maximizes his satisfaction with the help of an indifference curve.
51. Explain with the help of diagrams what is the meant by price elasticity being (i) greater than 1, (ii) less
than 1, (iii) equal to 1, (iv) equal to 0 and (v) equal to infinity. Give examples of each.

Production
52. Explain the concept of ‘production function’.
53. What does “Production” mean in Economics?
54. Describe a production indifference curve and its properties. Use diagrams in your answers.
55. Distinguish between ‘increasing returns to scale ’, ‘constant returns to scale ’ and ‘decreasing returns to
scale’. Use diagrams.
56. Show the relationship among ‘total product’, ‘marginal product ’ and ‘average product ’ with the help of a
diagram.
57. Distinguish between (i) Gross Domestic Product, (ii) Gross National Product, (iii) Net National Product,
and (iv) Disposable Income.
58. What is the implication of the opportunity cost curve being (i) convex, (ii) concave; and (iii) a straight
line?
59. Define production function. Show with the help of a diagram the relationship among ‘total product ’,
‘marginal product’ and ‘average product.’
60. What is an iso-product curve (or isoquant) and what are its properties?
61. Define and draw an iso-cost curve.
62. Show with the help of iso-product and iso-cost curves how a producer combines the two factors of
production to produce a given level of output.
63. What is meant by ‘fixed cost’ and ‘variable cost ’ and show in a diagram the position of ‘total cost ’, ‘total
fixed cost’ and ‘total variable cost’ curves.
64. In another diagram show the relationship between ‘average fixed cost ’, ‘average variable cost ’ and
‘average total cost’ of a firm in the short run.

Perfect and Monopoly Market

65. How equilibrium price and output is determined by a monopoly firm? Use diagram.
66. Show in a diagram and explain that monopoly output is determined at the point where marginal
revenue equals marginal cost.
67. Show with the help of a diagram how price is determined in monopoly.
68. “In monopoly, there is no supply curve.” – Illustrate.
69. State the principal features/main characteristics of perfect competition
70. How does an imperfect market affect the interest of an average consumer?
71. What are the characteristics of monopoly and illustrate how price is determined in a monopoly market?
72. Show with the help of a diagram how price is determined by a firm under conditions of perfect
competition in the short run.
73. How equilibrium price and output are determined by a firm under perfect competition?
74. State the distinguishing features of (i) perfect competition, (ii) Monopoly, (iii) Monopolistic competition,
and (iv) oligopoly
75. Identify with brief explanation the market structure of the following products/services in Bangladesh –
a. Water Supply in Dhaka City
b. Rice Market
c. Mobile telephone services, and
d. Banking services.
76. How does monopoly hurt the interest of common consumers?
77. State the distinguishing features of perfect competition and monopolistic completion. Giving at least
one example of a firm in each of these markets.
78. Show in a diagram the price-output combination of a monopolist and a competitive producer and
illustrate the superiority of competition over monopoly from the point of view of gain to the consumer.

Bangladesh Economy
79. Distinguish between micro-economics and macro-economics.
80. Explain definition and the difference between ‘positive economics ’ and ‘normative economics ’.
81. What are the main goals of macro-economic Policy or in Bangladesh?
82. What do you mean by Macroeconomics and Micro-economics?
83. What is meant by the problem of double counting in the measurement of national income?
84. How can the double counting problem be avoided?
85. What is unemployment and what are its various types?
86. Suggest remedies for unemployment in Bangladesh.
87. Is higher per capital income a good measure of economic development?
88. Briefly answer the following questions –
a. Does education promote economic development? How?
b. Does education lead to higher rural-urban migration? Why?
c. Does education to women tend to reduce their fertility? How?
d. Does education lead to ‘brain drain’ from developing countries? Why?
89. State and elaborate the main macroeconomic problems of Bangladesh.
90. Is foreign aid necessary for a developing country like Bangladesh? Present arguments in support of
your answer.
91. Distinguish between “balance of trade” and “balance of payments ”.
92. Following Bangladesh Bank’s practice, prepare a hypothetical statement of Bangladesh ’s balance of
payments account and explain the components elements.
93. How does foreign direct investment help in accelerating a country ’s economic development?
94. Discuss in what ways Bangladesh could attract more FDI in the county.
95. Discuss the principal items in Bangladesh’s balance of payments account prepared and published
periodically by its central bank.
96. what factors, according to you, influence a country’s economic growth
97. Is per capita income the only measure of economic development?
98. Account for the slowdown in Bangladesh’s export growth in 2014-15 compared to past few years.
99. Suggest measures for increasing Bangladesh’s export earnings.
100. Compare and contrast ‘Absolute advantage ’ and ‘Comparative advantage ’ in the light of Ricard ’s
theory of international trade.
101. Why do economists oppose protectionist policies that limit trade among countries?
102. Explain the concept of (i) Balance budget, (ii) Surplus budget, and (iii) Deficit budget.
103. Which type of budget do you recommend for Bangladesh and why?
104. Discuss the “anti-money laundering measures” so far undertaken by the Bangladesh Bank.
105. Critically discuss the role of microcredit in alleviating unemployment and poverty in Bangladesh.
106. Suggest measures for attracting more FDI in the country.
107. Describe the prevailing structure of the banking system in Bangladesh.
108. How to banks contribute to expediting the country ’s economic development?
109. What is ‘budget deficit’ and what are the different methods of financing this deficit?
110. Present arguments FOR and AGAINST deficit financing in Bangladesh.
111. Critically discuss the importance of Small and Medium Enterprise (SMEs) in Bangladesh.
112. What are the reasons behind the recent increasing trend in ‘classified loans ’ of banks in
Bangladesh?
113. Present arguments for and against welcoming foreign aid or FDI to Bangladesh.
114. What are the methods of computing the Gross Domestic Product (GDP) of a country?
115. Why does Government borrow?
116. Discuss the domestic sources of government borrowing in Bangladesh and their likely effect on the
economy.
117. Account for the growing imbalance in Bangladesh’s balance of payments in recent months and
suggest remedies.
118. Discuss measures considered necessary for correcting balance of payments deficits.
119. Explain the different methods of calculating Gross Domestic Product (GDP) of a country.
120. What problems are generally encountered in calculating GDP? State the problems in detail.
121. How do your account for the present appreciating trend of Bangladesh Taka vis-a-vis the US dollar?
122. Discuss the likely effects of the appreciation of the Taka on the country ’s (i) exports, (ii) imports
and remittances.
123. Critically appraise Bangladesh Bank’s Monetary Policy Statement for the first half (July – December)
of the Present fiscal year (2013-14).
124. What are the main functions of a commercial bank?
125. In what ways commercial banks in Bangladesh can help accelerate the country ’s economic
development?
126. Population is both an asset and, a liability for a country. – Critically discuss the statement.
127. Suggest measures for attracting more FDI in the country.
128. Distinguish between fixed and flexible exchange rate, stating the merits and demerits of each.

Monetary and Fiscal Policy

129. Explain the interdependence of monetary and fiscal policies.
130. Indicate the main features of Bangladesh Bank ’s Monetary Policy Statement (MPS) for July –
December, 2012.
131. Can monetary policy alone control inflation?
132. Discuss the role of monetary policy in combating inflation in a developing country like Bangladesh.
133. Briefly discuss the financial inclusion measures recently undertaken by the Bangladesh Bank.
134. What is inflation?
135. What according to you, are the main causes of the present state of inflation in the country?
136. What is money? Discuss the functions of money.
137. State and explain the components of money supply or in Bangladesh.
138. How will the following actions affect money supply?
a. A reduction in the bank rate?
b. An increase in the cash reserve requirement
c. Bangladesh bank purchase govt. securities from commercial banks, and
d. Govt. sells newly issued bonds to commercial banks.
139. Discuss the causes and consequences of inflation.
140. Suggest appropriate measures for controlling inflation.
141. What should be the goals of monetary policy in a developing country?
a. Are these objectives attainable at the same time?
142. Discuss the instruments of monetary policy.
143. ‘Inflation is like a tax on cash balances’. – Explain.
144. What is fiscal policy and what are its ingredients?
145. What happens to exchange rate when domestic inflation rate is high? Explain.
146. Discuss the role of fiscal policy in lowering the rate of inflation in a developing country like
Bangladesh.

Short Notes:
1. Cross Elasticity of Demand.
2. Opportunity Cost.
3. Monopolistic Competition.
4. Gresham’s Law.
5. Terms of Trade.
6. Basel-II Accord.
7. Inferior goods.
8. Fixed and variable cost.
9. Returns to scale.
10. Cash Reserve Requirement (CRR).
11. Disguised unemployment.
12. Floating exchange rate.
13. Statutory liquidity requirement (SLR).
14. Terms of Trade.
15. Giffen good.
16. Vicious circle of poverty.
17. Reserve Money.
18. Green banking.
19. Excess liquidity
20. CAMELS rating.
21. Financial Inclusion
22. Money multiplier.
23. Repo and reverse repo rate.
24. Asian Clearing Union.
25. Consumer’s surplus
26. Currency depreciation
27. Cost-push inflation
28. Public goods.
29. Index number
30. Fixed exchange rate.
31. Producer’s surplus
32. Income velocity of money
33. Substitution effect of price change.
34. Gross national product at factor cost.
35. Specialized banks
36. Returns to scale.
37. Iso-product curve.
38. Quasi-rent
39. Monopoly