Lecturer Of Home Economics Past Paper (6) Important
Multiple Choice Question For PPSC & FPSC Exams
1. If both the no. of unemployed people and the size of the labour force increase by 10,000, then
A. the unemployment rate will remain the same.
B. the unemployment rate will increase.
C. the unemployment rate will decrease.
D. we cannot tell.
2. Which of the following could be a reason of lack of jobs being overestimated:
A. the existence of disguised unemployment
B. people are underemployment
C. people holding only one job (as opposed to multiple jobs)
D. the existence of child labour
3. Which of the following is not a cost of voluntary unemployment?
A. potential output of the economy is greater than actual output
B. government loses tax revenue
C. firms lose (potential) revenues due to operating below capacity
D. mental stress undergone by the unemployed persons
5. Which of the following would constitute sound government policy if you subscribed to the Monetarist view on unemployment?
A. increase aggregate demand through monetary or fiscal policy
B. reduce the obstacles to downward wage rigidity (like unions, unemployment benefits, minimum wage legislations etc.)
C. Reduce the marginal income tax rate (to increase the incentive to work)
D. All of the the above
6. The persistence of a phenomenon, such as unemployment, even when its causes have been removed is called
A. The paradox of thrift.
B. hysteresis.
C. structural unemployment.
D. ceteris paribus.
7. Cyclical unemployment is the
A. portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries.
B. unemployment that results when people become discouraged about their chances of finding a job so they stop looking for work.
C. portion of unemployment that is due to seasonal factors.
D. unemployment that occurs during recessions and depressions.
8. The natural rate of unemployment is generally thought of as the
A. ratio of the frictional unemployment rate to the cyclical unemployment rate.
B. sum of frictional unemployment and cyclical unemployment.
C. sum of frictional unemployment and structural unemployment.
D. sum of structural unemployment and cyclical unemployment.
9. One of the tenets of the Classical view of the labour market is that the wage adjustments that are necessary to clear the labour market occur
A. slowly.
B. instantly.
C. very infrequently.
D. very quickly.
10. According to Keynesian economists, those who are not working
A. have given up looking for a job, but would accept a job at the current wage if one were offered to them.
B. are too productive to be hired at the current wage.
C. have chosen not to work at the market wage.
D. are unable to find a job at the current wage rate.
INFLATION
11. The index used most often to measure inflation is the
A. consumer price index.
B. wholesale price index.
C. student price index.
D. producer price index.
12. If you were the owner of a cycle manufacturing firm, would you be particularly worried if wage inflation were higher than price inflation?
A. No. Because you would still be able to sell your goods at the higher price.
B. Yes. Because the cost of your input is growing faster than the revenue obtained from your output
C. Yes. Because both price and wage inflation are bad.
D. No. Because any loss to the firm will be offset by the gain to the workers.
D. Money printing costs: inflation requires more currency notes to be printed and this raises the government printing costs.
14. In the long run, the Phillips curve will be vertical at the natural rate of unemployment if
A. the long-run supply curve is horizontal at the natural rate of inflation.
B. the long-run aggregate demand curve is vertical at potential GDP.
C. the long-run aggregate demand curve is horizontal at the natural rate of inflation.
D. the long-run aggregate supply curve is vertical at potential GDP.
15. According to the monetarists, the measured unemployment rate can
A. be reduced below the natural rate only in the short run, and not without inflation.
B. be reduced below the natural rate only in the long run, and only if the price level is constant.
C. be reduced below the natural rate only in the short run, and only if the price level is constant.
D. be reduced below the natural rate only in the long run, and not without inflation.
16. If the prices of all inputs seem to be rising, can you be absolutely sure that it is cost-push inflation?
A. No, because cost-push inflation is caused by an increase in the cost of only one input.
B. Yes, because that is exactly the definition of cost-push inflation.
C. No, because such a situation can also be caused by particular demand pressures in the economy.
D. Yes, because this is exactly what happens in stagflation.
17. The quantity theory of money implies that, provided velocity of money is constant, a given percentage change in the money supply will cause
A. an equal percentage change in nominal GDP.
B. a larger percentage change in nominal GDP.
C. an equal percentage change in real GDP.
D. a smaller percentage change in nominal GDP.
18. If input prices adjusted very slowly to output prices, the Phillips curve would be
A. downward sloping.
B. vertical or nearly vertical.
C. upward sloping.
D. horizontal or nearly horizontal.
19. If inflationary expectations increase, the short-run Phillips curve will
A. become vertical.
B. become upwarding sloping.
C. shift to the right.
D. shift to the left.
21. Assuming there is no government intervention in the foreign exchange market, which of the following statements must clearly be FALSE, given that?
A. If the capital account is in surplus, then the current account is likely to be in deficit.
B. If the current account is in deficit, then the capital account is likely to be in surplus.
C. If the current account is in balance, the capital account is also likely to be in balance.
D. None of the above.
22. Which of the following statements is necessarily TRUE?
A. A country runs a current account deficit if it imports more goods and services than it exports.
B. The sum of the current and capital accounts must be zero.
C. If both the current and capital accounts are in surplus, the exchange rate must appreciate.
D. None of the above.
23. All currencies other than the domestic currency of a given country are referred to as
A. reserve currencies.
B. near monies.
C. foreign exchange.
D. hard currency.
24. Exchange rates that are determined by the unregulated forces of supply and demand are
A. floating exchange rates.
B. pegged exchange rates.
C. fixed exchange rates.
D. managed exchange rates.
25. If the State Bank of Pakistan reduces the money supply, a floating exchange rate will help in reducing inflation because
A. as the money supply is decreased, the interest rate will increase, and the price of both Pakistani exports and Pakistani imports will rise.
B. as the money supply is decreased, the interest rate will increase, and the price of Pakistani exports will rise and the price of Pakistani imports will fall.
C. as the money supply is decreased, the interest rate will increase, and the price of Pakistani exports will fall and the price of Pakistani imports will rise.
D. as the money supply is decreased, the interest rate will increase, and the price of Pakistani exports and Pakistani imports will fall.
26. The fall (rise) in value of one currency relative to another is
A. a floating (fixing) of the currency.
B. an appreciation (depreciation) of a currency.
C. a depreciation (appreciation) of a currency.
D. a strengthening (weakening) of a currency.
27. If purchasing power parity prevails absolutely in a two country world, the real exchange rate between the two countries should be:
A. 1.
B. constantly changing.
C. relatively stable, but not constant
D. none of the above
28. The interest parity equation implies that there is a general tendency for:
A. exchange rates to be insensitive to the differential rates of interest between countries.
B. the currencies of relatively low-interest countries to appreciate.
C. the currencies of relatively high-interest countries to appreciate.
D. the currencies of relatively low-interest countries to depreciate.
Note that currencies with low rates of interest also typically have low inflation rates. This follows from the Fischer equation which maintains that the nominal interest rate = real interest rate + expected inflation.
29. Which of the following is (are) correct statement(s) about the current account deficit?
A. A current account deficit is bad, if it is being caused by excessive consumer spending
B. A current account deficit is bad, if it is fuelled by high fiscal deficits
C. A current account deficit is good, if it is caused by the excess of productive domestic investment over domestic savings
D. All of the above
30. The J-curve effect refers to the observation that
A. GDP usually decreases before it increases after a currency depreciation.
B. GDP usually decreases before it increases after a currency appreciation.
C. the trade balance usually gets worse before it improves after a currency appreciation.
D. the trade balance usually gets worse before it improves after a currency depreciation.
31. If Japan exports more direct investment capital abroad than expected, then the yen will tend to
A. appreciate.
B. fluctuate more than if exports were lower.
C. depreciate.
D. not be affected.
32. Today is Tuesday morning. If currency dealers expect the value of the dollar to fall by 10% on Wednesday, then, ceteris paribus, what will happen by the end of today to the Rs./dollar exchange rate? It will:
A. Rise by more than 10%.
B. Rise by exactly 10%.
C. Fall by less than 10%.
D. Remain constant.
Hint: Use y
your future expectation and the incentive it creates.
GROWTH
33. According to traditional thinking on the subject, which of the following would not generate economic growth in an economy?
A. an increase in the size of the labour force.
B. an increase in the productivity of capital.
C. a move to more capital intensive production methods
D. discovery of a major mineral resource in the country
34. When referring to economic growth, we normally refer to:
A. growth in actual real per capita output
B. growth in potential real per capita output
C. growth in actual nominal per capita output
D. growth in potential real per capita output
35. A variable whose value is determined by the model of which it is a part is termed ___________.
A. endogenous
B. exogenous
C. independent
D. constant
36. An example of capital deepening, given an increasing L, would be:
A. K increases so as to maintain a constant K/L
B. K increases so much that K/L increases
C. K remains constant so that L/K increases
D. K falls, so as to reduce K/L
37. The neo-classical growth model says that:
A. poor countries should catch-up (or converge to) with richer countries
B. higher savings (or rates of cap
C. the steady state growth rate of real output depends on the sum of the (exogenous) growth rates in population
and technical progress.
D. All of the above.
RELATIONSHIPS BETWEEN THE BIG FOUR
38. The length of a business cycle would be measured from
A. peak to trough.
B. trough to peak.
C. peak to peak.
D. the slump to the expansion.
39. If the economy is in the expansionary phase of the business cycle, aggregate demand is likely to be ______ , unemployment is likely to be ______ , inflation is likely to be ______ , and the current account of the balance of payments is likely to be moving towards ______.
A. rising; falling; rising; deficit
B. static; low; rising; deficit
C. falling; falling; falling; surplus
D. falling; rising; falling; surplus
40. If the economy is at the peak of the business cycle, aggregate demand is likely to be ______ ,
unemployment is likely to be ______ , inflation is likely to be ______ , and the current account of the balance of payments is likely to be moving towards ______.
A. rising; falling; rising; deficit
B. static; low; rising; deficit
C. falling; falling; falling; surplus
D. falling; rising; falling; surplus
41. If the economy is approaching the trough phase of the business cycle, aggregate demand is likely to be______ , unemployment is likely to be ______ , inflation is likely to be ______, and the current account of the balance of payments is likely to be moving towards ______.
A. rising; falling; rising; deficit
B. static; low; rising; deficit
C. falling; falling; falling; surplus
D. falling; rising; falling; surplus
42. Which of the following is not true regarding the effects of growth on the balance of payments and vice versa?
A. Generally, growth raises incomes which will translate into higher consumption and higher imports, causing the current account of the BOPs to deteriorate.
C. If the current account deficit reflects an underlying private sector resource deficit, it is likely to be bad for future growth.
D. If the current account reflects rising imports of military equipment by the government, it might not be beneficial for economic growth.
43. A country has high inflation and is running a current account deficit. What should it do in the context of the Salter-Swan diagram?
A. Reduce government spending and revalue the exchange rate
B. Increase government spending and devalue the exchange rate
C. Reduce the money supply and devalue the exchange rate
D. Increase government spending and revalue the exchange rate
 Important Multiple Choice Question For PPSC & FPSC Exams){kind=link}
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