FEDERAL PUBLIC SERVICE COMMISSION COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2004.
ECONOMICS, PAPER – I
TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100
NOTE: Attempt FIVE questions in all, including question No. 8 which is COMPULSORY. All questions carry EQUAL marks.
1. Resource allocation and their outcomes are the Central goals of all individuals. The emphasis is not on supply side; rather prices is determined by what people want and are prepared to pay for?
2. If aggregate demand exceeds the productive capabilities of the economy at full employment, there will be insufficient output to meet demand at the current price level. It creates an inflationary pressure and can be demonstrated as inflationary gap. Discuss.
3. State and demonstrate the determinants of Money Supply in an economy. What role does it play , if there is increase.
4. High tax rates means large disincentives to productive efforts that aggregate supply and tax revenues are both restricted. Give your arguments for a just tax system.
5. The major issue of developing countries is the volume of production and quality control. Customers and consumers expect it. How will you recommend the business community to prepare themselves for Global Free Trade?
6. IMF exists to co-ordinate foreign exchange dealings, and to give macro-economic policy advice. It provides a framework on matters of monetary and exchange rate policy. Discuss.
7. Critically examine that Quantity Theory of Money is more accurately a monetary theory of the price level.
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.
(1) In supply of and demand for a product, an increase in production costs will shift:
(a) Demand curve to the left
(b) Supply curve to the right
(c) Demand curve to the right
(d) Supply curve to the left
(e) None of these
(2) When a demand schedule is drawn up, which of the following is not held constant?
(a) Price of Substitutes
(b) Price of factors of production
(c) Price of Complementary goods
(d) The price of the goods
(e) None of these
(3) The more a person consumes of a thing:
(a) The smaller is his total gain
(b) The slower is the rate of increase in his total pleasure
(c) The higher is the price
(d) Consumes the maximum
(e) None of these
(4) When AC is less than MC:
(a) An increase in output would cause AC to rise
(b) Fixed costs must be rising
(c) AC to fall
(d) Should not produce beyond minimum AC
(e) None of these
(5) A firm’s total fixed costs are Rs. 2400. If at a certain output its price per unit is Rs. 20/- and average variable cost per unit is Rs. 14/-, the level of output is:
(a) 1000 units
(b) 800 units
(c) 600 units
(d) 400 units
(e) None of these
(6) Which of the following is not a condition of perfect competition?
(a) Inelastic Demand curve
(b) Single price
(c) Uniform product
(d) Many buyers
(e) None of these
(7) Profit maximizing monopolist will produce at the level of output, where:
(a) Price is greater than MC
(b) AR = MR
(c) AR = MC
(d) Total cost are minimized
(e) None of these
(8) A steel firm takes over a Coalmine Company. It is an example of:
(a) Holding Company
(b) Internal economies of scale
(c) Horizontal integrator
(d) Vertical integrator
(e) None of these
(9) Which of the following is not part of aggregate demand?
(a) Investment
(b) Govt. Spending
(c) Net exports
(d) Taxes
(e) None of these
(10) If GNP rises while 3 of the following four remain fixed, which of the four could not have risen?
(a) Consumption
(b) Taxes
(c) Saving
(d) Transfers
(e) None of these
(11) An increase in the income tax rate causes the full employment budget surplus to:
(a) Increase
(b) Depends on tax
(c) Decrease
(d) Depends on propensity
(e) None of these
(12) The most important factor responsible for growth in GNP has been:
(a) Technological change
(b) Govt. Spending
(c) Capital formation
(d) Population growth
(e) None of these
(13) A businessman expects an internal rate of return of 12% and decides that the investment is attractive. The decision is based on:
(a) Accelerator principle
(b) Marginal efficiency theory
(c) Marginal propensity to invest
(d) Multiplier principle
(e) None of these
(14) Over time increase in interest rate is expected to:
(a) Reduce inflation
(b) Increase inflation
(c) Reduction in GDP
(d) Decrease in liquidity
(e) None of these
(15) Exchange rates are:
(a) Only a demand factor
(b) A demand & supply factor
(c) Only supply factor
(d) Neither demand nor supply factor
(e) None of these
(16) An increase in disposable income
(a) Increases economic good
(b) Reduces economic good
(c) Reduces spending
(d) Has no effect on economy
(e) None of these
(17) Demand pull inflation is:
(a) When aggregate demand is rising
(b) When aggregate demand is low
(c) When costs are rising
(d) When costs are low
(e) None of these
(18) The foreign debt can be reduced by:
(a) Increase in domestic saving
(b) Increase in aggregate demand
(c) Increase in exchange rate
(d) Decrease in wealth
(e) None of these
(19) Net foreign debt is:
(a) The difference between exports and imports
(b) Debt less equity
(c) Difference between gross borrowing from non residents and lending overseas.
(d) Only savings
(e) None of these
(20) The focus of Monetary policy is a:
(a) Price stability
(b) External Balance
(c) Stimulating growth
(d) Current account deficit
(e) None of these