ECONOMICS, PAPER-I

TIME ALLOWED: THREE HOURS

PART-I (MCQs): MAXIMUM 30 MINUTES

PART-I (MCQs) MAXIMUM MARKS = 20

PART-II MAXIMUM MARKS = 80

NOTE:

(i) Part-II is to be attempted on the separate Answer Book.

(ii) Attempt ONLY FOUR questions from PART-II. ALL questions carry EQUAL marks.

(iii) All the parts (if any) of each Question must be attempted at one place instead of at different places.

(iv) Candidate must write Q. No. in the Answer Book in accordance with Q. No. in the Q. Paper.

(v) No Page/Space be left blank between the answers. All the blank pages of Answer Book must be crossed.

(vi) Extra attempt of any question or any part of the attempted question will not be considered.

PART-II

Q. No. 2.

Explain and prove mathematically that marginal revenue is less than price in case of monopolistic market structure.

(20)

Q. No. 3.

Explain diagrammatically, how an increase in price generates income and substitution effect for a normal good?

(20)

Q. No. 4.

Explain the inflation and unemployment relationship for pre and post 70s market economy.

(20)

Q. No. 5.

Deliberate on the various theories developed to study the price and money supply relationship.

(20)

Q. No. 6.

Discuss the evolution of international monetary systems adopted by the world economies.

(20)

Q. No. 7.

Discuss the Rostow’s stage of growth with special reference to Pakistan.

(20)

Q. No. 8.

Differentiate between the following: (5 each)

(a) Personal and disposable income

(b) Net domestic and gross domestic product

(c) Consumer price index and producer price index

(d) Multiplier and accelerator

(20)

ECONOMICS, PAPER-II

TIME ALLOWED: THREE HOURS

PART-I (MCQs): MAXIMUM 30 MINUTES

PART-I (MCQs) MAXIMUM MARKS = 20

PART-II MAXIMUM MARKS = 80

NOTE:

(i) Part-II is to be attempted on the separate Answer Book.

(ii) Attempt ONLY FOUR questions from PART-II. ALL questions carry EQUAL marks.

(iii) All the parts (if any) of each Question must be attempted at one place instead of at different places.

(iv) Candidate must write Q. No. in the Answer Book in accordance with Q. No. in the Q. Paper.

(v) No Page/Space be left blank between the answers. All the blank pages of Answer Book must be crossed.

(vi) Extra attempt of any question or any part of the attempted question will not be considered.

PART-II

Q. No. 2.

Faster development leads to environmental degradation. Explain how development can be sustained without degrading the environment?

(20)

Q. No. 3.

Critically evaluate major monetary and fiscal measures taken in Pakistan to promote agriculture development.

(20)

Q. No. 4.

Critically evaluate import substitution and export led policies adopted in Pakistan for industrial development.

(20)

Q. No. 5.

Explain factors responsible for deterioration of terms of trade for Pakistan. How Pakistan can improve its terms of trade?

(20)

Q. No. 6.

Present a detailed account of Pakistan’s experience of privatization process.

(20)

Q. No. 7.

Has interest-free banking been successful in Pakistan? Highlight the weaknesses and strengths of interest-free banking in Pakistan.

(20)

Q. No. 8.

Energy crisis in Pakistan has slowed down the growth process in Pakistan. In your opinion, how the energy shortage can be overcome?

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COMPETITIVE EXAMINATION-2010 FOR RECRUITMENT TO
POSTS IN BS-17 UNDER THE FEDERAL GOVERNMENT

ECONOMICS — PAPER I

PART-I: 30 MINUTES — MAXIMUM MARKS: 20
PART-II: 2 HOURS & 30 MINUTES — MAXIMUM MARKS: 80

PART – I (MCQ)

COMPULSORY

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 × 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.I × 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

NOTE:

(i) First attempt PART-I (MCQ) on separate Answer Sheet which shall be taken back after 30 minutes.

(ii) Overwriting/cutting of the options/answers will not be given credit.

PART – I (MCQ) — Continued

(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)

PART – II

NOTE:

(i) PART-II is to be attempted on the separate Answer Book.

(ii) Attempt ONLY FOUR questions from PART-II. All questions carry EQUAL marks.

(iii) Extra attempt of any question or any part of the attempted question will not be considered.

Q.2.

What is Consumer’s Equilibrium? How a consumer can be in equilibrium under Ordinal Approach? (20)

Q.3.

How is a firm’s demand curve for a particular variable factor input constructed when there is:

(i) only one variable input,

(ii) two variable inputs in the productivity process? (20)

Q.4.

What is National Income? Define and explain different concepts of National Income. (20)

Q.5.

What is the equation of exchange and the velocity of circulation? What assumptions are necessary to make the equation of exchange the quantity theory of money? (20)

Q.6.

Differentiate Balance of Payments and Balance of Trade. What are the transactions that are recorded in the current account and the capital account? (20)

Q.7.

Explain the theory of comparative cost by David Ricardo. (20)

Q.8.

Define the concept and methods of deficit financing. What are the reasons for deficit financing in Pakistan? (20)

ECONOMICS — PAPER II

PART-I: 30 MINUTES — MAXIMUM MARKS: 20
PART-II: 2 HOURS & 30 MINUTES — MAXIMUM MARKS: 80

PART – I (MCQ)

COMPULSORY

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 rulers 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 “Measuring the Condition of the World’s 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

NOTE:

(i) First attempt PART-I (MCQ) on separate Answer Sheet which shall be taken back after 30 minutes.

(ii) Overwriting/cutting of the options/answers will not be given credit.

PART – I (MCQ) — Continued

(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 country’s 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

PART – II

NOTE:

(i) PART-II is to be attempted on the separate Answer Book.

(ii) Attempt ONLY FOUR questions from PART-II. All questions carry EQUAL marks.

(iii) Extra attempt of any question or any part of the attempted question will not be considered.

Q.2.

Define economic development and economic growth. How can you differentiate between these two? (20)

Q.3.

Explain the important features and trends of Pakistan foreign trade. (20)

Q.4.

Discuss the cost and benefits of foreign economic assistance and give some suggestions for the solution to the foreign debt problem. (20)

Q.5.

Explain the major monetary and fiscal measures to promote industrial development in Pakistan. (20)

Q.6.

Explain critically the land tenure system in Pakistan. (20)

Q.7.

What is the difference between collective and cooperative framing? Explain the advantages and causes of failure of cooperative farming in Pakistan. (20)

Q.8.

Give a critical evaluation of the strategy of economic planning in Pakistan. (20)

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COMPETITIVE EXAMINATION-2009 FOR RECRUITMENT TO
POSTS IN BS-17 UNDER THE FEDERAL GOVERNMENT

ECONOMICS — PAPER I

PART-I: 30 Minutes — Maximum Marks: 20
PART-II: 2 Hours & 30 Minutes — Maximum Marks: 80

PART – I (MCQ)

COMPULSORY

Q.1.

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

(i) Modern microeconomic theory generally regards utility as:

(a) Cardinal
(b) Ordinal
(c) Independent
(d) Republican

(ii) A basic assumption of the theory of consumption choice is that:

(a) The consumer tries to get on the highest indifference curve.
(b) The consumer tries to get the most of good Y.
(c) The budget line is concave.
(d) None of these.

(iii) The substitution effect must always be:

(a) Positive
(b) Negative
(c) Zero
(d) Bigger than the income effect

(iv) The income effect:

(a) Must always be negative.
(b) Must always be positive.
(c) Can be negative or positive.
(d) Must be smaller than substitution effect.

(v) Normal goods experience an increase in consumption when:

(a) Real income increases.
(b) Real income falls.
(c) Price rises.
(d) Tastes change.

(vi) The demand for a good is price inelastic if:

(a) The price elasticity is one.
(b) The price elasticity is less than one.
(c) The price elasticity is greater than one.
(d) All of these.

(vii) A demand curve with unitary elasticity at all points is:

(a) A straight line
(b) A parabola
(c) A hyperbola
(d) All of these

(viii) The marginal product equals the average product when the latter is:

(a) ½ of its maximum value
(b) ¼ of its maximum value
(c) Equal to its maximum value
(d) Equal to its minimum value

(ix) A firm’s aspiration level is:

(a) Its profits last year.
(b) The boundary between “satisfactory” and “unsatisfactory” outcomes.
(c) Its highest previous profit level.
(d) None of these.

(x) The firm’s cost functions are determined by:

(a) The price of its product
(b) Its assets
(c) Its production function
(d) The age of the firm

(xi) The following industry often is a natural monopoly:

(a) Cigarette industry
(b) Publishing industry
(c) Drug industry
(d) Electric power industry

(xii) Recognizing that the assumptions of perfect competition never hold at all precisely, the perfectly competitive model is:

(a) Interesting mainly for academic studies.
(b) Outmoded and seldom used even by academic economists.
(c) Of considerable use to industrial economists, as well as academic economists.
(d) All of these.

NOTE:

(i) First attempt PART-I (MCQ) on separate Answer Sheet which shall be taken back after 30 minutes.

(ii) Overwriting/cutting of the options/answers will not be given credit.

PART – I (MCQ) — Continued

(xiii) Under perfect competition, rivalry is:

(a) Impersonal
(b) Very personal and direct, advertising being important
(c) Nonexistent since the firms cooperate
(d) All of these

(xiv) If average total cost is less than marginal cost at its profit-maximizing output, a perfectly competitive firm:

(a) Will make positive profit.
(b) Will operate at a point to the right of the minimum point on the average total cost curve.
(c) Will not discontinue production.
(d) All of these.

(xv) Monopolies arise as a consequence of:

(a) Patents
(b) Control over the supply of a basic input
(c) Franchise
(d) All of these

(xvi) A monopolistic firm will expand its output when:

(a) Marginal revenue exceeds marginal cost.
(b) Marginal cost exceeds marginal revenue.
(c) Marginal cost equals marginal revenue.
(d) Marginal revenue is negative.

(xvii) A monopolist will never produce at a point where:

(a) Demand is price-inelastic.
(b) Demand is price-elastic.
(c) Marginal cost is positive.
(d) Marginal cost is increasing.

(xviii) When demand is elastic:

(a) A fall in price is more than offset by an increase in quantity demanded, so that total revenue rises.

(b) The good is probably a necessity, so price has little effect on quantity demanded.

(c) A rise in price will increase total revenue, even though less is sold.

(d) Buyers are not much influenced by prices of competing products.

(xix) If the price elasticity of demand for product is 0.5, this means that:

(a) A 1 percent change in price will change quantity demanded by 50%.

(b) A 1 percent increase in quantity demanded is associated with a 0.5 percent fall in price.

(c) A 1 percent increase in price is associated with 0.5% fall in quantity demanded.

(d) A 1 percent increase in price will cause a 0.5% increase in quantity demanded.

(xx) Price elasticity of demand for a commodity tends to be greater:

(a) The more of a necessity it is.
(b) The more substitutes there are for it.
(c) Over shorter time periods.
(d) The lower the price.

PART – II

NOTE:

(i) PART-II is to be attempted on the separate Answer Book.

(ii) Attempt ONLY FOUR questions from PART-II. All questions carry EQUAL marks.

(iii) Extra attempt of any question or any part of the attempted question will not be considered.

Q.2.

Critically examine the elasticity of demand with reference to Price of the commodity and Income of the consumer. (20)

Q.3.

Differentiate between Perfect Competition and Monopoly. Which one is followed by the real world? If not, then name the existing one. (20)

Q.4.

Explain the Keynesian Consumption Function with suitable examples. (20)

Q.5.

Why we demand for Money? Explain each one of them. (20)

Q.6.

It is said that “Consumer Financing through Banking system is dangerous.” Explain. (20)

Q.7.

Differentiate between Balance of Trade and Balance of Payments with suitable examples. (20)

Q.8.

“Economic Growth is linked to the Development of Banking System.” Explain. (20)

ECONOMICS — PAPER II

PART-I: 30 Minutes — Maximum Marks: 20
PART-II: 2 Hours & 30 Minutes — Maximum Marks: 80

PART – I (MCQ)

COMPULSORY

Q.1.

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

(i) Ceteris paribus is a Latin term meaning:

(a) “One by one”
(b) “Equal under the law.”
(c) “Other things being equal.”
(d) “In accordance with the law.”

(ii) The slope of a curve is:

(a) Constant in the case of a straight line.
(b) Positive in the case of a direct relationship.
(c) Negative in the case of an inverse relationship.
(d) Equal to the change in vertical movement divided by the change in horizontal movement.

(iii) If the quantity of X increases whenever the price of X decreases, one can conclude that:

(a) The relationship between the price and the quantity of X is direct.
(b) The relationship between the price and the quantity of X is inverse.
(c) The relationship between the price and the quantity of X is linear.
(d) The relationship between the price and the quantity of X is nonlinear.

(iv) A simultaneous decrease in demand and supply will always result in:

(a) A decrease in the equilibrium price.
(b) An increase in the equilibrium price.
(c) A decrease in the equilibrium quantity.
(d) An increase in the equilibrium quantity.

(v) The marginal utility of a good refers to the:

(a) Total utility of the good prior to consumption of the last unit.
(b) Extra utility associated with consuming another unit of the good.
(c) Utility associated with consuming an alternative good.
(d) Consumer surplus associated with the consumption of an alternative good.

(vi) When a firm is experiencing economies of scale:

(a) The MP curve slopes upward.
(b) The LRAC curve slopes downward.
(c) Diminishing returns to labor have been suspended.
(d) The MC curve slopes downward.

(vii) Actual GDP may exceed potential GDP for a short period of time when:

(a) The unemployment rate is high.
(b) Plants run extra shifts that ordinarily are not scheduled.
(c) Plants are shut down to remove old equipment and install new equipment.
(d) Any or all of the above occur.

(viii) An example of frictional unemployment is:

(a) Workers at General Motors plants laid off because of slow car sales.

(b) Steel workers laid off by plant closings.

(c) A teenager who has quit work at McDonald’s waiting to take a job next week at the car wash.

(d) Inner-city welfare mothers taking classes to earn high-school equivalency degrees.

(ix) If inflation is expected to be 5 percent in the coming year and the nominal interest rate is 8 percent, then the real interest rate is:

(a) –3 percent
(b) 3 percent
(c) 8 percent
(d) 13 percent

(x) Which of the following is included in GDP as currently measured?

(a) Food stamps
(b) Used car sales
(c) Additions to inventories
(d) Purchases of Ford stock

(xi) Disposable income is:

(a) The same as personal income.
(b) Income that is used only for consumption.
(c) Personal income remaining after income taxes.
(d) Exclusive of social security payments or welfare.

NOTE:

(i) First attempt PART-I (MCQ) on separate Answer Sheet which shall be taken back after 30 minutes.

(ii) Overwriting/cutting of the options/answers will not be given credit.

PART – I (MCQ) — Continued

(xii) The difference between GNP and GDP is:

(a) Net factor payments to foreigners.
(b) Indirect business taxes paid to all levels of government.
(c) Net exports of goods and services.
(d) Capital consumption allowances.

(xiii) A country that makes large net income payments to investors in another country is likely to:

(a) Have a large GDP than GNP.
(b) Have smaller GDP than GNP.
(c) Grow slower economically than the other country.
(d) Grow faster economically than the other country.

(xiv) Which of the following would be the best measure of changes in the standard of living in an economy, expressed in a time series?

(a) Real GDP
(b) Output per labor hour of output
(c) Real GDP per capita
(d) Nominal GDP per capita

(xv) An MPC of less than 1 means that an increase in current disposable income would cause desired consumption expenditures to:

(a) Rise by less than full increase in disposable income.
(b) Fall slightly because the increase in income will increase saving.
(c) Rise by the full increase in disposable income.
(d) Stay the same because the MPS is also less than 1.

(xvi) For money to serve as an efficient medium of exchange, it must have all but which of the following characteristics?

(a) General acceptability
(b) Convertibility into precious metals
(c) High value relative to its weight
(d) Divisibility

(xvii) A bond that pays interest forever and never repays the principal is called a:

(a) Perpetuity
(b) Preferred share
(c) Fixed-term bond
(d) Treasury bill

(xviii) If given the same amount of inputs, U.S. farmers produce 2 tons of rice per acre while Japanese farmers produce 1 ton of rice per acre, we can be certain that:

(a) The United States should export rice to Japan.
(b) The United States has a comparative advantage in rice production.
(c) The United States has an absolute advantage in rice production.
(d) Japanese farmers must be paid twice as much as American farmers.

(xix) The doctrine of comparative advantage says that there are gains from international trade:

(a) Only if both comparative and absolute advantage are present in both countries.

(b) If opportunity costs are the same in the countries involved.

(c) Only there are economies of scale available.

(d) If countries specialize in the production of goods in which they are relatively more efficient.

(xx) The terms of trade are measured by:

(a) The quantity of imported goods that can be obtained for each unit of an exported good.

(b) The ratio of the price of imports to the price of exports.

(c) The value of imported goods that can be obtained for each dollar of exported goods.

(d) All of the above.

PART – II

NOTE:

(i) PART-II is to be attempted on the separate Answer Book.

(ii) Attempt ONLY FOUR questions from PART-II. All questions carry EQUAL marks.

(iii) Extra attempt of any question or any part of the attempted question will not be considered.

Q.2.

Discuss the Agriculture Policy of Pakistan keeping in view the World Trade Organization. (20)

Q.3.

Examine the Monetary Policy of Pakistan to reduce the inflation. (20)

Q.4.

Discuss the critical role of Industrial sector in the economic development of Pakistan. (20)

Q.5.

What are the sources of External Finance for the development of Pakistan economy? Explain ANY TWO of them. (20)

Q.6.

Discuss the Agricultural Taxation of Pakistan. Do you support the Agriculture Tax? Give reasons. (20)

Q.7.

Critically examine the Balance of Payments account of Pakistan. (20)

Q.8.

Write short notes on ANY TWO of the following: (20)

(i) Transport and Communication

(ii) Privatization in Pakistan

(iii) Energy & Fuel

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COMPETITIVE EXAMINATION FOR
RECRUITMENT TO POSTS IN BPS-17 UNDER
THE FEDERAL GOVERNMENT, 2008

ECONOMICS — PAPER I

PART I — MCQs

Question No. 1: Select the best option/answer and fill in the appropriate box on the answer sheet.

1.

In the theory of the firm, profit maximization is always synonymous with:

(a) Profitability
(b) Economic profit making
(c) Maximization of the sales revenue
(d) Both (a) and (c)
(e) None of these

2.

The law of demand is valid when price elasticity of demand is:

(a) Inelastic
(b) Perfectly elastic
(c) Unitary elastic
(d) Both (a) and (c)
(e) None of these

3.

At the breakeven point, a producer covering entire opportunity cost of production happens to produce under a market structure characterized as:

(a) Perfectly competitive
(b) Monopoly
(c) Oligopoly
(d) Monopolistic competition
(e) All of these

4.

In the short run, the decreasing returns to scale are caused by the existence of:

(a) Internal diseconomies
(b) External economies
(c) Technical inefficiency
(d) Allocative inefficiency
(e) Both (b) and (d)

5.

The left-hand-side variable of the saving function is always:

(a) Endogenous
(b) Exogenous
(c) Insignificant
(d) Significant
(e) Both (b) and (d)

6.

The macro management model of the classical function economist assigns the supreme role to the:

(a) Fiscal policy
(b) Monetary policy
(c) Commercial policy
(d) Market
(e) Both (b) and (c)

7.

While determining the national income equilibrium of an open economy, exports are considered to be:

(a) Exogenous
(b) Endogenous
(c) Autonomous
(d) Both (a) and (c)
(e) Both (b) and (c)

8.

Counterpart of the intercept of consumption function is the intercept of:

(a) Import function
(b) Exports
(c) Saving function
(d) X − M
(e) None of these

9.

Price stability in an economy is indicative of:

(a) Presence of sound money
(b) Rising output
(c) Rising employment
(d) Both (a) and (c)
(e) None of these

10.

The Central Bank of a country plays a significant role in her macroeconomic performance by regulating the:

(a) Money supply
(b) Supply of credit
(c) Interest rate
(d) Money market
(e) All of these

11.

The relationship depicted by the Phillips curve is not valid if the change in general price level is:

(a) Positively related with output
(b) Negatively related with output
(c) Positively related with employment
(d) Negatively related with employment
(e) All of these

12.

With each successive stage of its operation, the marginal cost of a firm in the banking sector:

(a) Increase
(b) Decrease
(c) Remains constant
(d) Remains unpredictable
(e) None of these

13.

The theory of comparative advantage from international trade considers the difference between the trading countries’ factor prices arising from the difference in:

(a) Factor productivity
(b) Factor intensity
(c) Factor availability
(d) Both (a) and (c)
(e) All of these

14.

Marshall-Lerner condition for stability of a foreign exchange market enquires that the sum total of the elasticity of demand for exports and demand for imports is:

(a) Cross elasticity of demand
(b) Income elasticity of demand
(c) Price elasticity of demand
(d) Both (b) and (c)
(e) None of these

15.

Expenditure-switching policies for adjusting the balance of disequilibrium include:

(a) Commercial policy
(b) Fiscal policy
(c) Monetary policy
(d) Both (b) and (c)
(e) All of these

16.

Deadweight loss of a trade tariff is higher if the demand and supply functions of importable are:

(a) Inelastic
(b) Elastic
(c) Completely inelastic
(d) Both (a) and (c)
(e) None of these

17.

An increasingly higher marginal income tax is:

(a) Progressive
(b) Regressive
(c) Proportional
(d) Both (b) and (c)
(e) None of these

18.

The reallocative role of public economies indicates the existence of:

(a) Production externalities
(b) Inefficiency in resource utilization
(c) Consumption externalities
(d) Both (a) and (c)
(e) None of these

19.

A price control interferes with the market by:

(a) Causing market imperfection
(b) Disallowing the market to work
(c) Introducing price floor or ceiling
(d) Both (b) and (c)
(e) All of these

20.

In the presence of elastic supply and demand conditions, sales tax on a product interferes with the market by causing:

(a) Welfare loss
(b) Efficiency loss
(c) Deadweight loss
(d) Both (a) and (b)
(e) All of these

PART II

Q.2

The demand function is a static model, while the shifts in demand introduces those dynamics which render the law of demand invalid. Discuss and explain with the help of diagrams. (20)

Q.3

What is economic profit? Diagrammatically distinguish between profit maximization and economic profit making and discuss the difference between the limitation of the latter for a monopoly and a perfectly competitive firm. (20)

Q.4

“Keynes’s General Theory was less of an antithesis of the classical economists and more of an antinodes for both the Great Depression and the looming threat of communism.” Discuss. (20)

Q.5

“The Central Bank of country is the watchdog of her economy.” Discuss and substantiate your answer by critically analyzing the role and performance of State Bank of Pakistan in the macro management of the country. (20)

Q.6

What is the relationship between debt burden and deficit financing? Discuss and compare two major sources of public debt and discuss their relative implications for national budget and sustainable development in a country like Pakistan. (20)

Q.7

“For labor abundant countries, the comparative advantage from international trade only exists within a static model, while the real-world dynamics mainly benefit the countries which happen to be both capital abundant and technologically advanced.” Discuss in the perspective of factors responsible for Doha Round stalemate. (20)

Q.8

Do you agree that the role of US dollar as the vehicle currency is a legacy of the Bretton Woods system of exchange rate determination? Why was the latter introduced and what factors were responsible for its demise? (20)

ECONOMICS — PAPER II

PART I — MCQs

Q.1

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

1.

Had net exports in Pakistan been reduced to “Zero” by contractionary fiscal policy through the first half of the 1980s, the Pakistan economy would have:

(a) Been producing output well above the full employment level of GNP
(b) Been producing output slightly above the full employment level of GNP
(c) Been producing output nearly equal to the full employment level of GNP
(d) Been producing output slightly lower to the full employment level of GNP
(e) Been producing output considerably lower than the full employment level of GNP

2.

The internal rate of return of any capital good could reasonably be described as:

(a) The particular rate of interest at which the capital good would just be worth buying or building, i.e., the present value of revenue would just be matched by costs.

(b) The dollar amount of profit that would accrue if that capital good were bought or built.

(c) The same thing as the market rate of interest.

(d) The physical increase in output (as distinct from the money value) that would accrue if the capital good were bought or built.

(e) The percentage figure obtained by adding up all net revenues that would accrue from the capital good and dividing this total by its cost.

3.

Consumers have budgeted a fixed money amount to buy a certain commodity. Within a certain range of prices, they will spend neither more nor less than this amount on it. Their demand in this price range would properly be designated as:

(a) In equilibrium
(b) Perfectly elastic
(c) Perfectly inelastic
(d) Highly inelastic but not perfectly so
(e) Unit-elastic

4.

An economy operating at full employment enters a period of high anticipated inflation. Which of the following statements accurately describes the likely result?

(a) Most people increase savings to be better prepared for the higher prices that they know are coming, thereby increasing capital investment, stimulating the rate of economic growth, and supporting lower interest rates.

(b) Most people decrease savings to increase current consumption and capital investment, thereby stimulating economic growth and supporting lower interest rates.

(c) Most people decrease savings to increase current consumption, thereby slowing capital investment, slowing the rate of economic growth and supporting lower interest rate.

(d) Most people increase savings to be better prepared for the higher prices that they know are coming, thereby reducing capital investment, slowing the rate of economic growth and supporting lower interest rate.

(e) Most people decrease savings to increase current consumption, thereby slowing capital investment, slowing the rate of economic growth and supporting higher interest rate.

5.

(Statement Needed)

(a) A general reduction in the tax rate applied to corporate profits.
(b) The elimination of the investment tax credit.
(c) A reduced emphasis on accelerated depreciation applied to a wide variety of types of capital, particularly building and equipment.
(d) The inclusion of intangible capital in the corporate income tax base.
(e) A contraction of the effective interest rate deduction against taxable corporate income.

6.

An absolute “precondition for growth” is the:

(a) Development of some excess of income over consumption.
(b) Creation of a surplus labour force for employment in manufacturing.
(c) Discovery and exploitation of some internal economies.
(d) Cultural acceptance of free enterprise principles of economic behaviour.
(e) Development of manufacturing to the point where it can begin to supplant agriculture.

7.

If a commodity’s return is in the nature of pure economic rent and a tax is imposed on the commodity, then:

(a) The incidence of tax is borne wholly by the suppliers, and price to the buyers will not change.
(b) The incidence is borne wholly by the buyers.
(c) The incidence will be shared between the suppliers and the buyers.
(d) The output of the commodity will fall and its price will rise.
(e) The output of the commodity will not fall but its price will rise.

8.

If a nation’s capital-output ratio gradually increases over time, this indicates that:

(a) The share of capital-owners in total output is increasing.
(b) The diminishing returns stage has not yet been reached with respect to capital.
(c) The marginal physical product of capital must have reached zero.
(d) Technological progress must be improving the productivity of capital.
(e) The law of diminishing returns is operating with respect to capital’s productivity.

9.

A general sales tax, without any exempted commodities, is considered to be:

(a) A progressive tax because it applies to luxuries as well as necessities.

(b) A regressive tax because wealthy people spend a smaller percentage of their total income on taxed commodities, and hence the proportion of payments to income is greater for people.

(c) A progressive tax because wealthy people spend more than poor people.

(d) A regressive tax because more money is collected from a poor person than from a rich one.

(e) A proportional tax because everybody pays the same tax percentage on each purchase.

10.

Given the usual downward-sloping shape of a market demand curve, what should be the effect of a tax that affects only the fixed cost of every firm remaining in a competitive market on the price received and the quantity supplied by each competitive firm?

(a) Price up and quantity up
(b) Price up and quantity down
(c) Price down and quantity up
(d) Price down and quantity down
(e) Price and quantity remain unchanged

11.

Suppose that long-term labour contracts hold the real wage above equilibrium. Which of the following statements would then hold?

(a) Fiscal stimulus would perversely increase the excess supply of labour.
(b) Monetary stimulus would perversely increase the excess supply of labour.
(c) Monetary stimulus would be totally ineffective to change the excess supply of labour.
(d) Fiscal stimulus only would reduce the excess supply of labour.
(e) Both fiscal and monetary stimulus could reduce the excess supply of labour.

12.

A substantial fall in the price of Pakistani currency in foreign currencies could be expected to affect physical quantities of exports from Pakistan and imports into Pakistan as follows:

(a) Increase both exports and imports
(b) Increase exports, decrease imports
(c) Decrease both exports and imports
(d) Decrease exports, increase imports
(e) Have no perceptible effect on either imports or exports.

13.

If the marginal utility of a commodity is zero, then:

(a) Total utility for this commodity has reached a maximum.
(b) The commodity in question has no utility, i.e., it is not one that consumers want to use.
(c) The paradox of value must be involved.
(d) The consumer has reached his or her equilibrium position with respect to purchase of this commodity.
(e) Total utility for this commodity must be zero also.

14.

A difference between a tariff on an imported good and a quota on such a good is:

(a) That a quota can never be made to yield revenue for the government, whereas a tariff can.

(b) That a tariff can never be made to yield revenue for the government, whereas a quota can.

(c) That a quota can be used to shut off all, or virtually all, the inflow of the imported good whereas a tariff cannot.

(d) That a tariff can be used to shut off all, or virtually all, the inflow of the imported good whereas a quota cannot.

(e) That a quantity equivalent quota will only generate the same revenue if correctly priced, for example, by an auction for import licenses.

15.

The relationship between marginal revenue and the price elasticity of demand is this; when marginal revenue is:

(a) Negative, demand must be inelastic
(b) Zero, demand must be inelastic
(c) Positive, demand must be inelastic
(d) Negative, demand must be unit-elastic
(e) Positive, demand must be perfectly elastic

16.

In a period of deflation (i.e. of generally falling prices), the “real” rate of interest obtained by a lender on money lent:

(a) Will exceed the nominal rate
(b) Will become a negative figure
(c) Will fall below the stated rate, although not to the extent of becoming a negative figure.
(d) Will become a meaningless or incalculable figure
(e) Will be less than the nominal rate.

17.

Suppose that net exports were to become more sensitive to change in the interest rate. You would expect to see, with respect to changing output:

(a) Both fiscal and monetary policy become more effective
(b) Both fiscal and monetary policy become less effective
(c) Monetary policies become more effective, while fiscal policy becomes less effective.
(d) Fiscal policy becomes more effective, while monetary policy becomes less effective.
(e) Fiscal policy becomes more effective, while monetary policy does not change.

18.

Net exports are most likely to be:

(a) Positively correlated with both interest rates and GNP
(b) Positively correlated with interest rate but fairly independent of GNP
(c) Positively correlated with GNP, but fairly independent of interest rates.
(d) Negatively correlated with GNP, but positively correlated with interest rates.
(e) Negatively correlated with both interest rates and GNP

19.

Trade theory predicts that protectionist measures produce:

(a) Permanent increase in the rate of inflation
(b) Temporary increase in the rate of inflation
(c) Permanent reductions in the rate of inflation
(d) Temporary reductions in the rate of inflation
(e) Temporary or permanent increase in the rate of inflation depending upon (1) whether they are quotas or tariffs and (2) the degree of market power held by domestic suppliers in the import-competing industry.

20.

When economists speak of investment, they are speaking of:

(a) The part of GNP used by households for current use.

(b) The part of GNP, past and present, that has been set aside to add to productive capacity.

(c) The part of GNP captured in the computation of rupee value of goods but not services.

(d) The part of GNP that the government devotes to the construction of roads, airports, and the like.

(e) The part of GNP used by business to add to productive capacity, and by households to add to their stock of new houses.

PART II

NOTE:

(i) PART-II is to be attempted on the separate Answer Book.

(ii) Attempt only FOUR questions from PART-II. All questions carry EQUAL marks.

(iii) Extra attempt of any question or any part of the attempted question will not be considered.

Q.2

What is meant by the statement that many Developing Countries are subject to “dominance, dependence and vulnerability” in their relations with rich nations? Explain the statement with examples.

Q.3

Why is an understanding of the meaning of development crucial to policy formulation in Developing Nations?

Do you think it is possible for a nation to agree on a rough definition of development and orient its strategies for achieving these objectives accordingly?

What might be some of the roadblocks or constraints in realizing these development objectives — economic and non-economic?

Q.4

What is meant by “absolute” poverty and the poverty gap?

How and why should we be concerned with the measurement of absolute poverty in the Developing World? Explain with examples.

Q.5

It is sometimes asserted that small peasant farms are backward and ignorant because they seem to resist agricultural innovations that could raise farm yields substantially.

Does this resistance stem from an inherent “irrationality” on their part, or might it be attributable to some other factors often overlooked by Western economists? Explain your answer.

Q.6

There appears to be widespread agreement that in those regions where the distribution of land ownership is highly unequal (Latin America and parts of Asia), land reform is necessary but not a sufficient condition for promoting and improving small-scale agriculture.

What is meant by this statement and by the concept of land reform?

Give some examples of supportive policy measures that might accompany land reform in the light of experience in Pakistan.

Q.7

How do the trade policies of developed countries affect the ability of less developed countries to benefit from greater participation in the world economy?

How do “non-trade” domestic economic policies of rich nations affect the export earnings of Developing Countries?

What is meant by “adjustment assistance” and why is it so important to the future of Developing Countries’ manufactured export prospects? Explain.

Q.8

How important is foreign aid for the economies of the developing world in relation to their other sources of foreign exchange receipts?

Explain the various forms development assistance can take and distinguish between bilateral and multilateral assistance.

Which do you think is more desirable and why?

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FEDERAL PUBLIC SERVICE COMMISSION
COMPETITIVE EXAMINATION-2007 FOR RECRUITMENT TO
POSTS IN BS-17 UNDER THE FEDERAL GOVERNMENT

ECONOMICS, PAPER-I

NOTE

(i) Attempt ONLY FIVE questions in all, including QUESTION NO. 8, which is COMPULSORY. All questions carry equal marks.

(ii) Extra attempt of any question or any part of the attempted question will not be considered.

(iii) Candidate must draw two straight lines (================) at the end to separate each question attempted in the Answer Book.

Q.1

Discuss the marginal productivity theory to determine the prices of factors of production.

Q.2

What is meant by Oligopoly? Explain “Zero-sum” game in relation to Game Theory.

Q.3

Explain the concepts of marginal propensity to save and marginal propensity to consume. Also discuss the existing relationship between marginal propensity to consume and multiplier.

Q.4

Explain the Quantity Theory of Money with suitable examples.

Q.5

What are the basic types of taxes? Which one is more suitable for developing economy?

Q.6

What are the components of Balance of Payments? Explain each with suitable example.

Q.7

Consumer credit is more suitable for developing economy? Explain.

COMPULSORY QUESTION

Q.8

Write only the correct answer in the Answer Book. Do not reproduce the question.

1. In perfect competition if a firm maximizes profit, then equilibrium:

(a) MR = MC
(b) AR = AC
(c) MR = AR = Price = MC
(d) All of these

2. The production function will be affected by changes in the prices of:

(a) Inputs
(b) Outputs
(c) Neither
(d) All of the above

3. If a firm can fund an investment from its own sources, the opportunity cost of its investment is:

(a) Less than zero
(b) Zero
(c) More than zero
(d) Neither

4. The funds used for further investment in joint stock company refers to:

(a) Distributed
(b) Undistributed
(c) Remaining
(d) All of the above

5. The % change in quantity demanded due to % change in income is:

(a) Price elasticity
(b) Price cross elasticity
(c) Income elasticity
(d) All of these

6. Indifference curves show various combinations of:

(a) One commodity
(b) Two
(c) Three
(d) All of these

7. Equilibrium price is a price at which:

(a) Quantity demanded is equal to quantity supplied
(b) Quantity demanded minus quantity supplied is zero
(c) Quantity demanded = quantity supplied
(d) All of these

8. In oligopoly market sellers are:

(a) Few
(b) Four
(c) Some
(d) A large number

9. Monopoly market is characterized by:

(a) A large number of sellers
(b) Only one seller
(c) Thousands of sellers
(d) All of these

10. A demand curve shows the relationship between the quantity demanded for a commodity over a given time and:

(a) The tastes of consumer
(b) The money income of consumer
(c) The price of related commodities
(d) The price of the commodity

11. A supply schedule shows the relationship between the quantity supplied of a commodity over a given time and:

(a) Factor prices
(b) Technology
(c) Both (a) and (b)
(d) The price of the commodity

12. The intersection of market demand and supply curves for a given commodity determines:

(a) The equilibrium price of the commodity
(b) The equilibrium quantity of the commodity
(c) The point of neither surplus nor shortage for the commodity
(d) All of these

13. If the % change in quantity demanded is more than % change in price, coefficient of price elasticity is:

(a) > 1
(b) < 1
(c) = 1
(d) = Zero

14. Disposable income is:

(a) Income less taxes
(b) Income less direct taxes
(c) Income less indirect taxes
(d) All of these

15. If the coefficient of price elasticity is less than one:

(a) It is normal good
(b) It is inferior good
(c) It is luxury good
(d) All of these

16. If the coefficient of income elasticity is negative:

(a) It is inferior good
(b) It is normal good
(c) It is luxury good
(d) All of these

17. If in a market the seller is charging different prices for the same commodity from different consumers, it is known as:

(a) Price discrimination
(b) Efficient selling
(c) Profit maximizer in monopoly
(d) All of these

18. The locus of equilibrium of consumers due to changes in price of a commodity is known as:

(a) Price consumption curve
(b) Income consumption curve
(c) Production possibility curve
(d) None of these

19. A pure number by which change in investment is multiplied to change in income is called:

(a) Multiplier
(b) Accelerator
(c) Stabilizer
(d) All of these

20. There is positive relationship between multiplier and:

(a) Marginal propensity to consume
(b) Marginal propensity to save
(c) Marginal efficiency of capital
(d) All of these

Time Allowed: Three Hours
Maximum Marks: 100

NOTE

(i) Attempt ONLY FIVE questions in all, including QUESTION NO. 8, which is COMPULSORY. All questions carry equal marks.

(ii) Extra attempt of any question or any part of the attempted question will not be considered.

(iii) Candidate must draw two straight lines (================) at the end to separate each question attempted in the Answer Book.

Q.1

Critically examine the post-9/11 growth experience of Pakistan and its position in the South Asia region, identify the main issue and recommend a strategy to maintain the posture of Pakistan.

Q.2

“Agriculture is the mainstay of Pakistan Economy.” Justify the statement and identify the focal areas of strength. Suggest measures to boost and stabilize the performance of the sector and its sub-sectors.

Q.3

What are the indicators of poverty? Review the poverty trends experienced in Pakistan. Evaluate the effectiveness of the steps being taken by the Government and suggest ways and means to further improve the micro indicators of prosperity for reducing poverty.

Q.4

Review the decision of WTO regarding liberalization of trade and globalization. Examine the implications and way forward for UDCs like Pakistan.

Q.5

Analyze the factors that led to the current account surplus after 9/11 and the growing deficit in the current account of the Balance of Payments later during the fiscal year 2004–05. What policy steps should be undertaken to stabilize the growth of current account surplus?

Q.6

The weight of industrial (non-agriculture commodity producing sector) in the GDP structure is 26%. Evaluate its performance and contribution to the overall growth of the economy, exports, price stability, employment and investment climate. Reflect upon the future path of action to further harness its potential.

Q.7

Highlight the significant contemporary issues which have emerged or could not be addressed by the explicit or implicit strategies of development planning in Pakistan. Suggest alternative options to tackle the issues both in the short and long run.

COMPULSORY QUESTION

Q.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. Consumer’s 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. Pakistan’s 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 up to April 2006 are:

(a) 140
(b) 151
(c) 160
(d) 184
(e) None of these

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