FINALTERM EXAMINATION
Sprin 2010
ECO401- Economics (Session - 4)
Time: 90 min
M a r k s: 69
Question No: 1 ( M a r k s: 1 ) http://vuzs.net
If pen and ink are complements, then an increase in the price of pen will cause:
► An increase in the price of ink.
► Less ink to be demanded at each price.
► A decrease in the demand for pen.
► A rihtward shift in the demand curve for ink.
Question No: 2 ( M a r k s: 1 ) http://vuzs.net
A demand curve is price inelastic when:
► Chanes in demand are proportionately smaller than chanes in price.
► Chanes in demand are proportionately reater than chanes in price.
► Chanes in demand are equal to chanes in price.
► None of the iven options.
Question No: 3 ( M a r k s: 1 ) http://vuzs.net
A demand curve is price elastic when:
► Chanes in demand are proportionately reater than chanes in price.
► Chanes in demand are equal to chanes in price.
► None of the iven options.
► Chanes in demand are proportionately smaller than chanes in price.
Question No: 4 ( M a r k s: 1 ) http://vuzs.net
A production function:
► Relates inputs with output.
► enerates a curve that is upward slopin.
► Shows diminishin marinal product of an input, since it ets flatter as output rises.
► All of the iven options.
Question No: 5 ( M a r k s: 1 ) http://vuzs.net
The market structure in which there is interdependence amon firms is:
► Monopolistic competition.
► Oliopoly.
► Perfect competition.
► Monopoly.
Question No: 6 ( M a r k s: 1 ) http://vuzs.net
Insurance companies operate under the principle of: ► Law of lare numbers.
► Law of small numbers.
► Law of zero numbers.
► All of the iven options.
Question No: 7 ( M a r k s: 1 ) http://vuzs.net
Who may start a price war in order to et a larer share of the market?
► Perfect competitor.
► Oliopolist.
► Monopolist.
► Economist.
Question No: 8 ( M a r k s: 1 ) http://vuzs.net
The lon run areate supply curve will shift to the riht if:
► The price level increases.
► Factors of production (such as labor and capital) increase.
► Expenditures (such as consumption and net exports) increase.
► The prices of inputs used to produce oods and services (such as waes and the price of oil) decrease.
Question No: 9 ( M a r k s: 1 ) http://vuzs.net
How many methods are there to measure ross Domestic Product?
► Three.
► Four.
► Five.
► Six.
Question No: 10 ( M a r k s: 1 ) http://vuzs.net
Suppose the overnment increases spendin. Which of the followin would be part of the crowdin out effect? ► Interest rate rises and investment falls.
► Interest rate rises and velocity of circulation also rises.
► Hiher interest rates encourae the central bank to increase the money supply.
► Interest rate falls and exports rise.
Question No: 11 ( M a r k s: 1 ) http://vuzs.net
ross National Product (NP) is:
► Net National Product (NNP) plus depreciation.
► National income discounted by the DP deflator.
► Income from forein investments.
► ross Domestic Product (DP) minus depreciation.
Question No: 12 ( M a r k s: 1 ) http://vuzs.net
Real ross National Product (NP) is best defined as:
► The pound value of all final oods and services produced in the economy durin a particular time period and measured in current prices.
► The pound value of all oods produced for final consumption by households in a particular year and measured in constant prices.
► The current pound value of all new and used oods produced and sold in the economy durin a particular time period.
► The market value of all final oods and services produced by the economy durin a iven time period, with prices held constant relative to some base period.
Question No: 13 ( M a r k s: 1 ) http://vuzs.net
In the complete Keynesian cross model, the areate expenditure line is specified as:
► AE = C + I.
► AE = C + I + X.
► AE = C + I + .
► AE = C + I + + (X - M).
Question No: 14 ( M a r k s: 1 ) http://vuzs.net
Under monopoly, when the demand curve is downward slopin, marinal revenue is:
► Equal to price.
► Equal to averae cost.
► Less than price.
► More than price.
Question No: 15 ( M a r k s: 1 ) http://vuzs.net
All of the followin conditions lead to the successful operation of a cartel EXCEPT:
► Market demand for the ood is relatively inelastic.
► The cartel supplies all of the world's output of the ood.
► Cartel members have substantial cost advantaes over non-member producers.
► The supply of non-cartel members is very price elastic.
Question No: 16 ( M a r k s: 1 ) http://vuzs.net
Which of the followin best describes the ''Capital widenin''?
► More capital per unit of labour.
► More capital and more labour but with the same amount of capital per unit of labour.
► Increasin the usae of existin capital.
► Importin capital from the developed world.
Question No: 17 ( M a r k s: 1 ) http://vuzs.net
Which of the followin statements best describes the difference between endoenous rowth theory and the Solow rowth theory?
► Endoenous rowth theory is a monetary theory whereas the Solow theory is a real theory.
► Endoenous rowth theory assumes diminishin returns to capital and the Solow theory assumes constant returns.
► In endoenous rowth theory, economies with the same technoloy and savin rate need not convere to the same steady state as in the Solow model.
► All of the iven options are correct.
Question No: 18 ( M a r k s: 1 ) http://vuzs.net
Which of the followin is NOT to be included in national product?
► Wheat produced and consumed by a farmer.
► House built by the owner himself.
► Old house sold by its owner A to person B.
► Machines made by firm A.
Question No: 19 ( M a r k s: 1 ) http://vuzs.net
The demand curve for chicken is downward-slopin. Suddenly the price of chicken rises from Rs.130 per k to Rs.140 per k. This will cause:
► The demand curve for chicken to shift to the left.
► The demand curve for chicken to shift to the riht.
► Quantity demanded of chicken to increase.
► Quantity demanded of chicken to decrease.
Question No: 20 ( M a r k s: 1 ) http://vuzs.net
The overnment supports research in basic science because:
► It is a public ood.
► External costs are created.
► Internal benefits are created.
► Free markets would do so otherwise.
Question No: 21 ( M a r k s: 1 ) http://vuzs.net
National defense is a ood example of: ► Public ood.
► Inferior ood.
► iffen ood.
► Private ood.
Question No: 22 ( M a r k s: 1 ) http://vuzs.net
Refer to the above fiure, when disposable personal income is $1,200 billion, consumption is:
► $600 billion.
► $800 billion.
► $1,200 billion.
► $2,000 billion.
Question No: 23 ( M a r k s: 1 ) http://vuzs.net
In classical theory, excess supply of a product would be associated with:
► Risin interest rates.
► Fallin interest rates.
► Risin price for the product.
► Fallin price for the product.
Question No: 24 ( M a r k s: 1 ) http://vuzs.net
The Monetarist key to solve the inflation problem was:
► Stable money supply.
► Stable output.
► Stable prices.
► Stable economic rowth.
Question No: 25 ( M a r k s: 1 ) http://vuzs.net
Which of the followin predictions can be made usin the rowth rates associated with the equation of exchane, iven that velocity is stable and that the economy moves to its potential output (YP) in the lon run?
► If the money supply rows at a faster rate than rowth in YP, there will be inflation.
► If the money supply rows at the same rate as rowth in YP, the price level will fall and there will be deflation.
► If the money supply rows at the same rate as rowth in YP, the price level will also increase at the same rate as rowth in YP,.
► None of the iven options.
Question No: 26 ( M a r k s: 1 ) http://vuzs.net
Which of the followin will happen by a reduction in net exports all other thins bein equal?
► It will result in a movement up alon the areate demand curve.
► It will reduce areate supply.
► It will reduce areate demand.
► It will not chane areate demand or areate supply in the domestic economy.
Question No: 27 ( M a r k s: 1 ) http://vuzs.net
Which of the followin will happen by an increase in net exports all other thins bein equal?
► It will result in a movement downward alon the areate demand curve.
► It will increase areate demand.
► It will increase areate supply.
► It will not chane areate demand or areate supply in the domestic economy.
Question No: 28 ( M a r k s: 1 ) http://vuzs.net
A chane from $1.00 = Rs. 80.00 to $1.00 = Rs. 85.00 represents:
► Depreciation of the dollar.
► An appreciation of the dollar.
► An appreciation of the rupee.
► None of the iven options.
Question No: 29 ( M a r k s: 1 ) http://vuzs.net
We can measure economic rowth with the help of:
► The Consumer Price Index.
► The Producer Price Index.
► ross Domestic Product.
► Marinal Propensity to Consume.
Question No: 30 ( M a r k s: 1 ) http://vuzs.net
A contractionary fiscal policy shifts:
► The areate demand curve o the left.
► The areate demand curve to the riht.
► The areate supply curve to the riht.
► The areate supply curve to the left.
Question No: 31 ( M a r k s: 1 ) http://vuzs.net
Which of the followin is a primary function of a central bank?
► To reulate dividend payments by corporations.
► To act as a reulator of banks.
► To control the bond market.
► To publish statistics on bankin and related financial matters.
Question No: 32 ( M a r k s: 1 ) http://vuzs.net
In which condition, the IS curve will shift to the riht?
► Consumer confidence in the economy improves.
► Firms become more optimistic about the economy and decide to invest more at each interest rate.
► The overnment increases transfer payments.
► It will shift to the riht in all of the iven conditions.
Question No: 33 ( M a r k s: 1 ) http://vuzs.net
Which of the followin will be TRUE if real income rose and the interest rate fell followin an increase in overnment purchases?
► IS curve must be vertical.
► LM curve must be vertical.
► Central Bank must have increased the money supply at the same time.
► Central Bank must have decreased the money supply at the same time.
Question No: 34 ( M a r k s: 1 ) http://vuzs.net
What will happen to LM curve if the central bank increased the supply of real money balances?
► It would become steeper.
► It would become flatter.
► It would shift upward.
► It would shift downward.
Question No: 35 ( M a r k s: 1 ) http://vuzs.net
In rowth process of under developed countries, hih rate of population rowth:
► Is not accompanied by smaller increase in product per capita.
► Is not accompanied by increasin total product.
► Is an obstacle in economic rowth.
► Is ood for economic rowth.
Question No: 36 ( M a r k s: 1 ) http://vuzs.net
Which of the followin is the main reason of poverty in third world countries?
► eneration ap.
► Communication ap.
► Forein exchane ap.
► None of the iven options.
Question No: 37 ( M a r k s: 1 ) http://vuzs.net
Refer to the above fiure, the marinal propensity to consume equals:
► 0.
► 0.5.
► 1.0.
► 2.0.
Question No: 38 ( M a r k s: 1 ) http://vuzs.net
Which of the followin is TRUE in a planned economy?
► oods and services produced reflect consumer sovereinty.
► Price is relatively unimportant as a means of allocation resources.
► There is no incentive for people to work hard.
► All income is completely evenly distributed.
Question No: 39 ( M a r k s: 1 ) http://vuzs.net
For which of the followin ood, the substitution effect of a lowered price is counteractin by the income effect?
► For an inferior ood.
► A substitute ood.
► For an independent ood.
► For a normal ood.
Question No: 40 ( M a r k s: 1 ) http://vuzs.net
Suppose all inputs are increased by 30% and output increases by more than 30% in a production process. This means that the firm experiences: ► Decreasin returns to scale.
► Constant returns to scale.
► Increasin returns to scale.
► None of the iven options.
Question No: 41 ( M a r k s: 1 ) http://vuzs.net
The total cost (TC) function is iven as TC = 500 + 30Q. What is the average total cost?
► 500
► 30+ (500/Q)
► 30Q2+500Q
► 30
Question No: 42 ( M a r k s: 1 ) http://vuzs.net
The total cost (TC) function is iven as TC = 200 + 5Q. What will be the average total cost if four units of commodity are produced?
► 20
► 55
► 50
► 220
Question No: 43 ( M a r k s: 1 ) http://vuzs.net
Collusion occurs when two or more firms decide to cooperate with each other in the settin of prices and ► Labor demanded.
► Capital demanded.
► Quantity of ood supplied.
► Quanlity of ood supplied.
Question No: 44 ( M a r k s: 1 ) http://vuzs.net
A public ood is non-excludable because:
► One person’s use or consumption does not reduce the ability of another to use it.
► External costs are enerated throuh its production.
► External benefits are enerated throuh more consumption.
► No one can be effectively excluded from usin that ood.
Question No: 45 ( M a r k s: 1 ) http://vuzs.net
Accordin to Keynesian economics, the Inflation is neatively related with: ► Level of income.
► Employment.
► Poverty.
► Unemployment.
Question No: 46 ( M a r k s: 1 ) http://vuzs.net
The principle which states that a chane in income causes a manified chane in investment is termed as the:
► None of the iven.
► Paradox of thrift.
► Multiplier effect.
► Accelerator effect.
Question No: 47 ( M a r k s: 1 ) http://vuzs.net
Monetarists characterized the lon-term tradeoff between output and: ► Employment level.
► Inflation.
► Forein direct investment.
► Deflation.
Question No: 48 ( M a r k s: 1 ) http://vuzs.net
If central bank increased the money supply, then what will be happen to IS curve?
► IS curve will Shifts rihtward.
► IS curve will Shifts leftward.
► IS curve will remain unaffected.
► IS curve will become vertical.
Question No: 49 ( M a r k s: 3 )
What is meant by exchane rate? Also ive example of exchane rate.
Question No: 50 ( M a r k s: 3 )
On what basis countries ain from trade?
Question No: 51 ( M a r k s: 5 )
A. "Slope of the consumption function is less than 1".What is meant by this statement? B. What are the major macroeconomic variables involved in the determination of national income?
(M a r k s: 2+3)
Question No: 52 ( M a r k s: 5 )
Why is taxation necessary? What are the principles of taxation?
Question No: 53 ( M a r k s: 5 )
Why could the world as a whole not experience a problem of a current account balance of payments deficit?
