ST.JOSEPH CATHOLIC SCHOOL ADAMA 2011 E.C /2019 GC.

Model exam of Economics for grade

12S

Time allowed:- 2 Hours

General Instruction
This examination paper contains 80 multiple choice questions. Each question have four
alternatives. Read the questions carefully & blacken the letter of your choice on the separate
answer sheet provided.

1. Which one of the following issue is studied under macro economics?

A. The price of wheat in merkato
B. The employment level in the economy
C. The income level of luxury goods buyers
D. The total outputs of the agricultural sector
2. What would happen on the total revenue of a firm as the price of a product increases & when the price
elasticity of demand is unitary elastic?
A. TR remains unchanged B. TR decline C. TR increase D. TR becomes indeterminate
3. A closed economy doesn’t allow ______
A. Sale of goods to households C. Sale of goods to firma
B. Sale of goods to government D. Sale of goods to other countries.
4. The national development plan behind the adoption of Agricultural Developments –Led Industrialization
(ADLI) by EPRDF is based on the assumption that:-
A. Industrial development doesn’t bring economic development
B. The industrial sector provides agriculture with raw material
C. The industrial sector has the highest potential to adopt technology and to create forward and back ward
linkages with the other sector
D. The development of the agricultural sector assists industrial development by creating backward and
forward linkage with the industrial sector and serves as a source of capital.
5. All of the following except one characterizes the Pre 1974 agricultural sector policies and strategies
A. Large scale mechanized commercial farms
B. Establishment of comprehensive package project
C. Establishment of Minimum package project
D. Nationalization of large scale farms

6. What is the main reason for the prevalence of zero economic profit in the long run for a perfectly competitive
and a monopolistically competitive firm?
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A. The production of Homogeneous product C. The existence of free entry & exit of firms
B. The ability of the firms to set or make prices D. The existence of few dominant firms
7. What would happen on the nations GDP if the monetary value of exports & imports are equal?
A. GDP declines C. GDP increases
B. GDP remains unchanged D. GDP either rises or falls based on their magnitude
8. Which agricultural sector policy and strategy is closely related with the current government of Ethiopia?
A. Formation of state farms & co-operative farms
B. Adoption of Agricultural development led industrialization strategy
C. Establishment & development of package projects.
D. Establishment of large scale mechanized commercial farms by the government
9. Which one of the following statement is false?
A. The MPC falls with an increase in income
B. The MPC of the poor class of the society is higher than the rich class of the society
C. Autonomous consumption can never be zero, even if income is zero.
D. The MPS declines with an increase in income
10. Which of the following policy measure is used to combat or solve a government budget deficit?
A. Contractionary fiscal policy C. Expansionary fiscal policy
B. Contractionary monetary policy D. Expansionary monetary policy
11. What we call an obligation that commercial banks must fulfill in keeping a certain percentage of their deposit
in the account of the national Bank?
A. Discount rate B. Demand deposit C. Required Reserve Ratio D. Velocity of money
12. Assuming that the short run average product of the variable input (AP L) is 12 units & also this is the
maximum APL, Then which one of the following is true?
A. At that level of employment, Total product will begin to fall ,
B. The APL at that level will be greater than the Marginal Product (MPL)
C. The MC of the last unit of output reaches its minimum.
D. The MC of the last unit of output exactly equals to the AVC
13. A tax system is said to be regressive if rich people pay:
A. Less tax than poor people C. Higher taxes than poor people.
B. The same amount of tax as poor people D. Nothing

14. What is the main objective of import-substitution strategy of industrial development?

A. To save foreign exchange
B. To protect infant industries from strong foreign competition
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C. To produce goods domestically which otherwise, could have been imported from abroad
D. All of the above
15. Which type of unemployment is caused by recessions in the economy?
A. Frictional unemployment C. Structural unemployment
B. Cyclical unemployment D. Disguised unemployment
16. Many Chinese investors are producing in Ethiopia. The profit earned by the Chinese investors is recorded
A) As part of Ethiopia’s’ GNP and China’s GDP
B) As part of Ethiopia’s GDP and China’s GNP
C) As part of Ethiopia’s GNP and China’s GNP
D) As part of Ethiopia’s GDP and China’s GDP
17. Which monetary policy instrument is the best measure to control inflation?
A. Increasing the bank rate of interest C. Selling bonds and treasury bills
B. Increasing the cash – reserve ratio D. All of the above
18. One of the main reason that protectionist and government officials may choose (favor) using an import Quota
instead of tariff is
A. A Quota generate more revenue for the government than do tariff
B. A Quota ensures that the quantity of import is strictly limited and restricted
C. A Quota creates less market distortions than do tariff
D. A Quota gives less power to politician than do tariff
19. Suppose that a consumer started consuming 20 k.g of a good when his income increased to Birr 2000 which
he used to consume 30 k.g of a good when his income level was 1200 birr. What will be the income elasticity
of demand & the nature of the good respectively?
A. 0.8 and Normal good C. -0.8 and inferior good
B. 0.8 and inferior good D. -0.8 and normal good
20. The sale of second hand goods is not included in the estimation of Gross Domestic Product (GDP). This is
because
A. These goods are not current year production C. These goods are less useful
B. These goods are available at cheaper prices D. These goods have a shorter life

21. “When a government sets a price floor, surplus occurs in the market” this statement is
A. Inductive statement C. Deductive statement
B. Normative economic statement D. Positive economic statement

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22. If the demand for a product increases, ceteris paribus, then what would be the new equilibrium Price &
equilibrium quantity?
A. Lower equilibrium price & lower equilibrium quantity
B. Higher equilibrium price & lower equilibrium quantity
C. Lower equilibrium price & higher equilibrium quantity
D. Higher equilibrium price & higher equilibrium quantity
23. Which argument of the Industrial sector refers to a capacity of developed industrial sector to generate more
foreign currency?
A. The employment argument C. The Development argument
B. The Balance of Payment argument D. The Surplus argument
24. Which one of the following is a major problem of the Ethiopian education sector?
A. Low illiteracy rate in the country C. poor quality and commitment of leadership of the sector
B. Low dropout and repetition rate D. High enrollment rate of girls in education
25. The demand curve slopes downward due to
A. The law of diminishing marginal utility (LDMU) C. Substitution effects
B. Income effect D. All of the above
26. The key economic concepts that serves as the basis for the study of Economics is :
A. Inflation B. Unemployment C. Scarcity D. Money
27. Suppose the AP of 6 workers is 150 units of a good and that of 7 workers is 170 units, Then how much will be
the MP of the seventh worker?
A. 200 B. 270 C. 290 D. 220
28. The Structural Adjustment program refers to
A. The re-organization of institutions and economic activities in line with planned economy
B. The re-organization of institutions and economic activities in line with free market Economy
C. Expansionary fiscal policy through increasing government expenditure
D. Contractionary monetary policy through reducing the money supply

29. A pure monopoly firm can make a positive economic profit both in the short run and in the long run. This is b/c
A. A monopolist firm will operate at a minimum Average Cost
B. Entry barriers prevent new firms from entering the market
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C. A monopolist firm can buy inputs more cheaply

D. Monopoly firms are more efficient than other firms
30. The PPF/PPC is downward sloping, because
A. The economy is inefficient
B. Economic growth is occurring
C. The economy cannot produce beyond its bounds
D. An efficient economy cannot produce more of one good without producing less of another.
31. Which farming system is the most dominant one in the Ethiopian agriculture?
A. The modern commercial farming system C. The pastoral farming system
B. The small holder farming system D. The nomadic farming system
32. Which one of the following is an implicit cost of production?
A. Estimated rent expense for the firm’s own building C. Interest on borrowed funds
B. Cost of raw materials purchased D. Wages to hired labors.
33. Which one of the following consumption is independent of the level of disposable income?
A. Induced consumption C. Marginal propensity to consume
B. Autonomous consumption D. Average propensity to consume
34. Currently the Ethiopian government is constructing the great renaissance dam. From which category of
expenditure budget the money is being spent?
A. Recurrent expenditure budget C. revenue budget
B. Capital expenditure budget D. Deficit financing budget
35. According to the law of Diminishing marginal utility, the additional satisfaction (MU) of the good declines
as_________
A. The good becomes more expensive C. A house hold consumes more of the good
B. A household’s income increases D. The preference of households change over time
36. A perfectly competitive firm would not continue production if .
A. Price is less than the AFC. C. The price is less than AVC in the short –run
B. The firm gets a normal profit D. The loss is equal to the TFC
37. Which determinant of consumption decreases the current household’s consumption level?
A. Future expectation of higher price of goods C. Higher level of wealth
B. Higher rate of interest on saving D. Higher level of current income
38. Suppose that the producer increases all inputs by 40% & as a result, output of the firm is increased by 30%,
then which type of returns to scale is occurred in the production process?
A. Increasing returns to scale C. constant returns to scale
B. Decreasing returns to scale D. Proportional returns to scale
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39. Which of the following best describes the study of Economics?

A. A study concerned with how to make money
B. A study of how the society uses its goods & services in determining the proper distribution of income
C. A study of how the society uses its scarce resources in satisfying the unlimited wants of the society
D. A study of how to make choice between alternatives.
40. Which one of the following is the limitation of Uni-Modal agricultural strategy?
A. It protects peasants from eviction
B. It reduces poverty in the rural economy
C. It focuses only on food crops rather on other marketable products
D. It reduces the outgoing migration of people from rural areas
41. Given a production function as TP = 100L – 2L2, then the Average product & the marginal product will be
A. AP = 100 -2L and MP = 100-4L C. AP = 100 – 4 L and MP = 100 – 2L
B. AP = 200 -4L and MP = 100 -4L D. AP = 100 – 4L and MP = 200 -4L
42. Assume that St. Joseph school increased the student’s monthly school fee hoping to increase its Total
Revenue. However the Total Revenue of the school finally decreased. Then what will be the nature of
elasticity for the service rendered by the school?
A. Unitary elastic B. Inelastic C. Elastic D. Perfectly Inelastic
43. Which one of the following is not among the need for reform measures in Ethiopia in the 1990’s?
A. The worst poverty situation in the country
B. The lower growth rate of GDP of the country
C. The lower government budget deficit
D. The huge debt burden of the country
44. All of the following policy measures are related to expenditure switching policy, except
A. Privatization C. trade intervention
B. Exchange rate devaluation D. Taxes and tariffs
45. Which one is different from the others?
A. Infant Mortality Rate (IMR) C. Gross Enrollment Rate (GER)
B. Access to safe water D. Life expectancy at Birth (LEB)
46. At an output level of 10 units a firm incurred an Average cost (AC) of Birr 200 and a total variable cost
(TVC) of Birr 100, then what will be the firm’s Average Fixed Cost (AFC)?
A. 100 Birr B. 190 Birr C. 20 Birr D. 300 Birr
47. In which market structure do the interdependence of firms is very vital for their existence in the market?
A. Oligopoly B. Pure monopoly C. Monopolistically competitive D. Perfectly competitive
48. The relevant stage of production for an efficiency maximizing (a rational) firm is b/n
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A. Maximum MPL & maximum APL C. Maximum APL & maximum TP

B. Zero MPL & maximum TP D. Maximum TP & Zero MPL
49. When an increase in the price of one good causes the demand for the other good to decline, then the two
goods are______________
A. Complements B. Substitutes C. Independent D. Inferior
50. Consumer price index in the 2004 was 50 bill birr and consumer price index in the year 2005 was 60 bill birr
How much is inflation rate in 2005.
A. 10% B. 15% C. 20% D. 25%

Answer Questions from number 51 up to 53 based on the following information

Assume that a particular household spends Birr 1,500 and one-fifth of monthly disposable
income on consumption each month, and further assume that the household’s income is spent on
consumption and savings only.

51. Which one of the following is the correct consumption function of the household from the above information
given?
A. C = 1,500 – 1/5Yd C. C = 1/5Yd – 1,500
B. C = 1,500 +1/5Yd D. - 1/5Yd + 1,500
52. How much will be the level of total consumption & saving respectively when the households’ disposable
income is Birr 2,000?
A. 1,100 and 900 B. 900 and 1,100 C. 100 and 1,900 D. 1,900 and 100
53. What would be the households’ Marginal Propensity to Save (MPS) and the Marginal Propensity to Consume
(MPC) respectively?
A. 0.2 and 0.8 B. 0.8 and 0.2 C. 0.4 and 0.6 D. 0.6 and 0.4

54. All of the following except one is among the major reasons that led the Minimum Package Projects to be
unsuccessful?
A. The over ambitious objectives attached to the projects
B. The relatively small amounts of resources allocated to them
C. Over concentration of the projects on the cooperativization process
D. The huge costs required to duplicate the projects
55. All are true about the Ethiopian agriculture, except

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A. Market-oriented C. Production for subsistence

B. Rain fed D. Employment of family based labor
56. Which one of the following is not a method of collusion among oligopolist firms?
A. Price discrimination C. Price leadership
B. Cartel D. Conscious parallelism
57. At which phase of a business cycle do Investment, Employment, Output and Income reach at their lowest and
minimum level?
A. Peak B. Depression C. Recovery D. Recession
58. GDPMP = C + Ig + G + (X - M). This approach of measuring GDP is known as____________.
A. Value added approach C. Income approach
B. Expenditure approach D. Final product approach
59. Economic theories suggest that two countries can both benefit from trade even if one country is more efficient
at producing everything. What concept describes this theory?
A. Opportunity cost C. Absolute Advantage
B. Comparative advantage D. Production possibility frontier
60. The largest market for Ethiopia’s exports is _______
A. Africa B. Asia C. Europe D. America
61. In circular flows of income and expenditure, real flows consist of flows of
A. Money incomes from factor services such as rent
B. The money expenditures incurred for the purchase of goods and services
C. Goods and services from the producers to the buyers
D. Factor services from the producers to the owners of a factor
62. Which industrial group is the largest contributor in terms of employment generation in Ethiopia?
A. Textile C. Food and beverage
B. Wood and furniture D. Non-metal and the paper
63. Which one of the following is not an element of Ethiopia’s Structural Adjustment program (SAP) in the
1990”s?
A. Privatization of rural lands C. Liberalization of foreign trade
B. Removal of domestic price controls D. Currency devaluation
64. Which of the following statements is true?
A. If a resource is free, choice has to be made in its use
B. A scarce resource has no opportunity cost b/c it has no alternative use
C. A free resource has opportunity cost
D. Scares resources have opportunity cost
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65. Which one of the following is the problem facing the formal financial sector in Ethiopia?
A. Lack of demand for loans
B. Availability of trained and skilled personnel in the sector
C. Small amount of non-performing loans
D. A good part of the economy is not monetized
66. Among the following which measures of Industrial performance indicate factor productivity?
A. Value added per person employed C. Value-added at factor cost
B. Gross value of output D. Value-added at current market price
67. Which of the following is a basic functional difference b/n Central Banks and Commercial Banks?
A. Central Banks deal with foreign exchange issues while Commercial Banks do not
B. Central Banks Follow up the end use of credit and loans while Commercial Banks do not
C. Commercial Banks engage in generating profits while Central Banks do not
D. Commercial Banks issue bonds and treasury bills while Central Banks do not
68. Which one is true about the properties of indifference curve?
A. Indifference curve upward sloping
B. Two indifference curves intersect each other
C. Indifference curve is convex to the origin
D. Utility level can change on the same indifference curve
69. The nominal GDP of Ethiopia in the year 2001 was 580 million Birr and the consumer price index (CPI) in
the same year was 1,000 Birr, then what was the real GDP of Ethiopia during the same year in Million Birr?
A. 58 million B. 5.8 million C. 580 million D. Unknown
70. Assume that Mahlet is at equilibrium consuming two goods Orange and Banana. If the marginal utility of
orange and banana are 50 and 80 respectively. How much is price of banana if the price of orange is 10 Birr?
A. 10 Birr B. 30 Birr C. 18 Birr D. 16 Birr
71. Which one of the following method of financing government budget deficit creates inflationary pressure?
A. Domestic borrowing C. Issuing currency
B. External borrowing D. Both A and B
72. When GDP is greater than GNP
A. Net export is positive C. Net factor income is positive
B. Net export is negative D. Net factor income is negative

Answer Question 73 and 75 based on the following information

Suppose that an individual demand function for a commodity is given by Qd = 50-0.2P and the individual
supply function is given by Qs = 0.1P-10, where Qd is the quantity demanded of a commodity per day, Qs
Instructor:
represents - Zegnet
the quantity Tadesse
supplied Page
of a commodity per9 day and P is the market price of a commodity in Birr per
ST.JOSEPH CATHOLIC SCHOOL ADAMA 2011 E.C /2019 GC. Model exam of Economics for grade
12S

73. Which combination of Price and quantity clears the market respectively?
A. 200, 10 B. 220, 1,200 C. 40, 400 D. 4, 40
74. What would be the price elasticity of demand and the price elasticity of supply at equilibrium respectively?
A. 7.33, 1.83 B. 4, 2 C. 8.33, 1.83 D. 6.45, 4.22
75. What would happen on the market if the government set a price floor of 225 Birr?
A. Shortages of 250 units C. Shortages of 7.5 units
B. Surplus 7.5 units D. Surplus of 250 units
76. Quasi Money includes:
A. Saving B. Time deposits C. Demand deposits D. A and B
77. The production possibility frontier equation is given by 4A+2B=20, where A and B are the two goods
produced by a given economy. What is the opportunity cost of increasing the production of good ‘B” from 2
units to 3 units?
A. Loss of 0.5 units of good “A” C. Loss of 1 units of good “B”
B. Loss of 0.5 units of good “B” D. Loss of 1 unit of good “A”
78. Among the problem of the education sector of Ethiopia, which problem is excluded?
A. High drop- out and repletion rate.
B. High access to tertiary education level
C. Low enrollment of girls at every level
D. Great disparity b/n the relatively developed and under developed regions.

79. Which one is not among the main objectives for the establishment of comprehensive package projects?

A. Raising the per capital income of the poor peasants.

B. Creating employment opportunities.
C. Expanding experimental stations for developing new ideas in agricultural technology.
D. Encouraging public investment in the agricultural sector
80. Which one of the following is not true about industrialization?
A. Industrialization is a one time or a sudden occurrence
B. Industrialization requires science and technology
C. Industrialization brings a structural transformation of the national economy

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D. In the industrialization process, the Manufacturing sub sector plays the most important and dynamic role

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