Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
•
Total Marks: 100
Multiple-Choice Questions (Circle your Answer)
1. In Deductive method of reasoning :
a)
b)
c)
d)
General conclusions are drawn from general facts
General conclusions are drawn from specific facts
Specific conclusions are drawn from specific facts
Specific conclusions are drawn from general facts
2. Q + P = 5 , 2P – Q = 5.5, Find Equilibrium Price and Quantity
a) P = 6 , Eq QTY= 0.5
b) P = 10 , Eq QTY = 4.5
c) P = 3.5 , Eq QTY = 1.5
d) P = 14, Eq QTY= 8.5
3. “Economics is a science which studies human behavior as a relationship between ends and
scarce means which have alternative uses”:
a) Definition by Prof. Paul Samuelson
b) Definition by Lionel Robbins
c) Definition by Alfred Marshall
e) None of the above
4. Dependency Ratio is:
a) The Ratio of working population for non-working population
b) The Ratio of male population to female population
c) The Ratio of literate population to illiterate population
d) Any of the above
e) None of the above
5. In case of a right angled Indifference curve, the goods are :
a) Prefect complements
b) Prefect Substitutes
c) Inferior / Giffen Goods
d) None of them
6. The budget line of a consumer explains various combinations of two commodities that:
a)
b)
c)
d)
Are actually purchased at market prices
Can be purchased at market prices
Equate consumers expenditure to his money income
B and C above
e) A and C
7. An decrease in the price of commodity Y only, will do with of the following:
a) Rotate the budget line clock wise
b) Shift the budget line upwards
c) Rotate the budget line anti – clock – wise
d) Shift the budget line downwards
8. The law of diminishing returns states that:
a) As a firm uses more of a variable resource, given the quantity of fixed resources, the
average product of the firm will increase
b) As a firm uses more of a variable resource, given the quantity of fixed resources, marginal
product of the firm will eventually decrease
c) In the short run, the average total costs of the firm will eventually diminish
d) in the long run, the average total costs of the firm will eventually diminish
9. The change in the quantity demanded of a good resulting from a change in relative price with
the level of satisfaction held constant is called the ____________ effect.
a) Price
b) Income
c) Substitution
d) None of them
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
10. A shift of the supply curve of oil raises the price from $10 a barrel to $30 a barrel and reduces
the quantity demanded from 40 million to 23 million barrels a day. You can conclude that the
a) Supply of oil is elastic.
b) supply of oil is inelastic
c) Demand for oil is inelastic
d) Demand for oil is elastic.
11. If money income of the consumer and price of both the commodities decrease by 25 percent,
the budget line will:
a) Shift upwards
b) Shift downwards
c) Stay the same
d) Any of the above is possible
e) None of the above is possible
12. Assume that the market for computers begins in equilibrium. Then, there is a decrease in a price
of Pentium processors used in the production of computers. When the new equilibrium is
reached:
a) The price and quantity of computers will both have risen
b)
c)
d)
e)
The price and quantity of computers will both have fallen
The price of computers will have risen and the quantity will have fallen
The price of computers will have fallen and the quantity will have risen
None of the above
13. If X and Y both are complementary commodities, price consumption curve will:
a) Be a horizontal straight line
b) Be a vertical straight line
c) Slopes upward to the right
d) All of the Above
e) None of the Above
14. If income consumption curve incline to Y-axis we can conclude that:
a) X is an inferior good
b) X is a Giffen good
c) X and Y both are inferior goods
d) Y is Normal good
d) X and Y both are normal goods
e) A, B and D
15. If price consumption curve resulting from a decrease in price of X and moving towards Y, it
means that Y is:
a) An inferior/ Giffen commodity
c) A superior commodity
b) A Necessity of life
d) Normal commodity
e) C & D
f) None of the above
16. The substitution effect occurs because of the two reason:
a) Change in relative prices of commodities, One is cheaper and the other costlier
b) Change in the Income and price of other commodity
c) Income of the consumer does not change d) A and C e) B and C
17. Which of the following equations corresponds to an optimal choice point?
i) MRS = PX/PY ii) MUX/MUY = PX/PY
iii) MUX/PX = MUY/PY
a) (i) only
b) (i), (ii), and (iii) only
d) (i) and (ii) only
e) (iii) and (iv) only
iv) MUX/PY = MUY/PX
c) (ii) and (iv) only
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
18. Which of the following is true regarding income along a price consumption curve?
a)
b)
c)
d)
Income is increasing.
Income is decreasing.
Income is constant.
The level of income depends on the level of utility.
19. Sales of Good X have fallen from 120,000 per year to 108,000 per year following an increase in
the price of Good Y from $1 to $2
Which of the following statements most accurately describes the relationship between Goods X
and Y?
a)
b)
c)
d)
They are complements, and the relationship between them is very strong
They are substitutes, and the relationship between them is very strong
They are complements, but the relationship between them is relatively weak
They are substitutes, but the relationship between them is relatively weak
20. Which of the following statements is always true if an indirect tax is imposed on a good or service:
a) The price will rise by an amount equal to the tax.
b) The producer will bear more of the tax than the consumer.
c) The price rise will be smaller the greater the price elasticity of demand is.
d) The price rise will be greater the greater the price elasticity of demand is.
21. If a more efficient technology was discovered by a firm, there would be:
a) An upward shift in the AVC curve. c) A downward shift in the AFC curve.
b) An upward shift in the AFC curve. d) A downward shift in the MC curve.
22. The tendency for unit costs to fall as output increases in the short run is due to the operation of:
a)
b)
c)
d)
Economies of scale
The experience of diminishing marginal returns
Falling marginal revenue
Increasing marginal returns
23. Which of the following cannot be true? In the short run, as output falls:
a) Average variable costs falls
c) Average total cost falls
b) Average fixed cost falls
d) Marginal costs falls
24. When marginal product reaches its maximum, what can be said of total product?
a)
b)
c)
d)
Total product must be at its maximum
Total product starts to decline even if marginal product is positive
Total product is increasing if marginal product is still positive
Total product levels off
25. Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to
produce it. Which is true?
a)
b)
c)
d)
The firm will earn accounting and economic profits.
The firm will face accounting and economic losses.
The firm will face an accounting loss, but earn economic profits.
The firm may earn accounting profits, but will face economic losses.
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
26. If a business currently sells 10,000 units of its product each month at $10 each unit and the
demand for its product has a price elasticity of -2·5, a rise in the price of the product to $11 will?
a) Raise total revenue by $7,250.
b) Reduce total revenue by $17,500.
c) Reduce total revenue by $25,000.
d) Raise total revenue by $37,500.
27. A price ceiling set above the equilibrium market price will result in:
a) Market failure
c) Excess supply over demand
b) Market equilibrium
d) Excess demand over supply
28. Which one of the following would normally cause a rightward shift in the demand curve for a
product?
a) A fall in the price of a substitute product
b) A reduction in direct taxation on incomes
c) A reduction in price of the product
d) An increase in the price of a complementary product
29. In traditional theory, which of the following best describes a firm's short run supply curve:
a) Its marginal cost curve where price is less than average variable costs
b) Its marginal cost curve where price is greater than average variable costs
c) Its average cost curve where price is less than marginal cost
d) Its average cost curve where price is greater than marginal cost
30. If the price per unit of x rises from $1.20 to $1.30, it is expected that monthly demand will fall
from 800,000 units to 730,000 units. What is the arc elasticity of demand when the price is $1.20?
a) 1.05
b) 1.14
c) 0.64
d) 0.86
31. Which combination of demand and supply curves would be appropriate for a firm attempting to
increase its profits by increasing its market share?
a)
b)
c)
d)
Inelastic demand, inelastic supply
Elastic demand, elastic supply
Inelastic demand, elastic supply
Elastic demand, inelastic supply
32. Muddy Waters Co is an industrial company which has altered its production methods so that it
has reduced the amount of waste discharged from its factory into the local river. Which of the
following is most likely to be reduced?
a)
b)
c)
d)
Total private costs
Social costs
External benefit
Variable costs
33. Which of the following would cause the production possibility frontier for an economy to shift
outwards?
(i) A reduction in the level of unemployment
(ii) A rise in the rate of investment
(iii) A fall in the price of one factor of production
(iv) A rise in output per worker
a) (i) and (ii) only
b)(i), (ii) and (iii) only
c) (i), (iii) and (iv) only
d) (ii) and (iv) only
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
34. The price elasticity of demand (PED) of good A is negative, its income elasticity of demand (IED)
is positive and its cross elasticity of demand (XED) with respect to good X is negative. What is
the nature of good A?
a) A good bought for purposes of ostentation, complementary to X
b) An inferior good, substitute for X
c) A normal good, complementary to X
d) A Giffen good, substitute for X
35. The marginal product of labor curve shows the change in total product resulting from a:
a) One-unit increase in the quantity of a particular resource used, letting other resources
vary.
b) One-unit increase in the quantity of a particular resource used, holding constant other
resources.
c) Change in the cost of a variable resource.
d) Change in the cost of a fixed resource.
36. Which of the following is an example of an external economy of scale:
a) Increased wage costs due to falling unemployment in the region.
b) The employment of specialist managers by a firm to cope with higher output levels.
c) The extension of low-cost telecommunication links to an area of the country not previously
served by such links.
d) Cheaper finance in recognition of the firm's increased share of the market and therefore
its stability.
37. Harold Ippoli employs 30 people in his factory which manufactures sweets and puddings. He
pays them $5 per hour and they all work maximum hours. To employ one more person he would
have to raise the wage rate to $5.50 per hour. If all other costs remain constant, the marginal
cost of labour is:
a) $20.50
c) $15.00
d) $5.50
c) $0.50.
38. Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit
costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm
has an accounting profit of:
a) $500,000 and an economic profit of $200,000.
b) $400,000 and an economic profit of $200,000.
c) $300,000 and an economic profit of $400,000.
d) $200,000 and an economic profit of $500,000
39. All of the following are example of the sources of internal economies of scale for a business
except one. Which ONE is the EXCEPTION?
a) Lower external financing costs for a larger firm
b) Greater specialisation of tasks in its labour force
c) Lower supply costs resulting from its bulk buying
d) Lower production costs resulting from long run technical change in the economy
40. If the government imposes a maximum price for a good that is below the equilibrium price, the
resulting market shortage will be greatest when:
a)
b)
c)
d)
The demand is price elastic and the supply is price inelastic
The demand is price elastic and the supply is price elastic
The demand is price inelastic and the supply is price elastic
The demand is price inelastic and the supply is price inelastic
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
41. When a firm doubles its inputs and finds that its output has more than doubled, this is known as:
a) Economies of scale.
b) Constant returns to scale.
c) Diseconomies of scale.
d) A violation of the law of diminishing returns.
42. Which of the following is NOT true?
a) A firm will carry on producing in the short run provided that price at least equals average
variable cost
b) A firm will carry on producing in the short run provided that price at least equals average
fixed cost
c) A firm will carry on producing in the short run provided that total revenue at least equals
total variable cost
d) A firm will stop producing in the long run if total revenue is less than total cost
43. Which of the following defines the long-run equilibrium position of a firm operating under
conditions of perfect competition?
a) MC = MR, AC < AR, MR < AR
b) MC = MR, AC = AR, MR < AR
c) MC > MR, AC = AR, MR = AR
d) MC = MR, AC = AR, MR = AR
[
44. Which ONE of the following is an example of an external social cost?
a) Bad weather reducing the output of the farm sector.
b) Possible illness caused to owners of mobile phones as a result of excessive use.
c) Smoke emissions by a factory causing health problems for nearby residents.
d) Cost increases caused by rising prices of imported raw materials.
45. All of the following factors will lead to an imperfect allocation of resources EXCEPT which ONE?
a) There are some production costs that are not borne by the producer.
b) Consumers only wish to buy a limited amount of the product.
c) There are spill over benefits in consumption.
d) Consumers have limited knowledge of market prices
46. If the government imposed a price for a good that was above the equilibrium price, the
consequence would be:
a) A contraction of demand, an increase in supply and a market surplus
b) A decrease in demand, an extension of supply and a market surplus
c) A contraction in demand, an extension in supply and a market surplus
d) A rise in supply, a fall in demand and a market shortage.
47. Which of the following factors would weaken the long-term survival of a cartel?
a) Greater price elasticity of demand for the product in the long run
b) A high concentration of production in the hands of a few firms
c) Substantial costs associated with entry into the industry
d) Broadly similar cost structures between industry members
48. An expansionary fiscal policy would be most likely to reduce unemployment if the country had:
a) A high marginal propensity to import
b) A low marginal propensity to save.
c) A high marginal tax rate.
d) A low marginal propensity to consume
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
49. Which one of the following is NOT necessarily a function of money?
a)
b)
c)
d)
Acts as a store of value
Is legal tender
Is a unit of account
Acts as a medium of exchange
50. Which one of the following is an advantage for a country adopting a flexible exchange rate
system regime?
a)
b)
c)
d)
It provides certainty for organisations engaged in international trade
It eliminates transaction costs
Monetary policy can be used to manage to exchange rate
It reduces the need for central banks to keep reserves of foreign exchange
51. Which of the following is not methods of measurement of national income?
a)
b)
c)
d)
e)
Value Added Method or Product Method
Income Method
Factor income in production process
Expenditure Method
Economic Growth Method
52. The balance of payments accounts are defined as:
a) The difference between the government’s receipts and its expenditure over the period of
a year.
b) The difference between the exports of goods and services and imports of goods and
services over the period of a year.
c) The surplus or deficit on a country’s international trade over a given period.
d) A statement of the economic transactions between residents of a country and the rest of
the world over a given period
53. Withdrawals from the circular flow of income in an economy are:
a) Savings, investments and exports
b) Investment, taxation and imports
c) Investment, government spending and exports minus imports
d) Savings, taxation and imports
54. The government of Malta is considering different ways of increasing the rate of economic growth
in its country.
Which one of the following would NOT be a suitable policy for it to introduce?
a) Reducing rates of direct tax
b) Reducing interest rates
c) Reducing the level of government spending
d) Increasing investment in training to help reduce unemployment
55. All of the following government policies would tend to raise national income over time EXCEPT
which ONE
a) Increased expenditure on the economic infrastructure.
b) Tax cuts to encourage higher demand from consumers.
c) Policies to encourage the training of labour.
d) Financial incentives to encourage personal and corporate saving
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
56. Which of the following would lead to cost push inflation:
(i) An increase in indirect taxation
(ii) An increase in consumer expenditure resulting in aggregate demand exceeding aggregate
supply
(iii) An increase in wages and salaries
a) (i) and (ii)
b) (i) and (iii)
c) (ii) and (iii)
d) (iii) only
57. Which of the following is an example of structural unemployment?
a) A computer programmer leaves his job and moves abroad
b) A construction worker is always unemployed during the winter months
c) A worker loses her job during a recession
d) A car worker is replaced by a robot
58. A government wishes to continue to combine an expansionary fiscal stance with anti-inflationary
monetary policy. What combination of policy instruments should it choose?
a) Taxation up, borrowing down, interest rates up
b) Spending down, taxation down, interest rates down
c) Interest rates stable, taxation greater than spending
d) Spending greater than taxation, interest rates up
59. Which ONE of the following would lead a country’s balance of payments current account to move
towards a surplus?
a) A rise in commodity imports.
b) An inflow of foreign capital into the economy.
c) An increase in foreign tourism into the country.
d) An increase in government tax receipts
60. The economy of iceland is currently experiencing high levels of demand pull inflation, and the
government is keen to reduce this.
What would be the most appropriate macroeconomic policy to try to achieve this goal?
a) Increased government expenditure, increased taxation and increased interest rates
b) Decreased government expenditure, increased taxation and decreased interest rates
c) Decreased government expenditure, increased taxation and increased interest rates
d) Increased government expenditure, decreased taxation and decreased interest rates
61. With reference to the law of comparative advantage, the consequences of protectionism in
international trade are that protectionist measures will prevent:
a) Each country of the world from maximising its economic wealth
b) Each country of the world from maximising the value of its exports
c) The countries of the world from maximising their total output with their economic
resources
d) Each country of the world from achieving equilibrium in its balance of payments
62. Which one of the following statements is not true?
a) The balance of payments accounts always balance to zero
b) Current account deficits have to be financed by surpluses on the capital or financial
accounts
c) The J curve shows that the short term effect of a depreciation in currency is the reduction
in a current account deficit
d) A rise in the exchange rate is likely to reduce domestic inflation
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
63. Which one of the following options would a government attempting to reduce the deficit on its
country’s balance of payments current account deficit be most likely to employ?
a) An expansionary fiscal policy
b) A depreciation of its currency
c) An reduction in interest rates
d) Provide incentives for foreign companies to invest in its country
64. Markets in which derivatives are traded are classified as
a) Assets backed market
b) Cash flow backed markets
c) Mortgage backed markets
d) Derivative securities markets
65. Money market where debt and stocks are traded and maturity period is more than a year is
classified as
a) Shorter term markets
b) Capital markets
c) Counter markets
d) Long-term markets
66. Agreement between two parties to exchange cash flows in future and cash flows are based on
underlying instruments is classified as
a) Swaps
b) Interchange
c) Exchange
d) Index
67. Which of the following describe functions of the World Trade Organisation (WTO)?
(i) Settling trade disputes between member countries
(ii) Monitoring developments in world trade and reviewing barriers to international trade
(iii) Providing financial assistance to developing countries to help them develop international
trade
a) (i) and (ii)
b) (i) and (iii)
c) (ii) and (iii)
d) All of them
68. Which of the following define GNP at factor cost?
(i) Consumers' total expenditure on domestically produced goods and services
(ii) The value of total output produced domestically plus net property income from abroad, minus
capital consumption
(iii) The total income received by residents in a country in return for factor services provided
domestically and abroad
a) (i) and (iii)
b)(ii) and (iii)
c)(iii) only
d)(i) and (ii)
69. Which ONE of the following would lead to a fall in the value of the multiplier?
b)
c)
d)
e)
A decrease in the marginal propensity to consume.
A fall in the level of public expenditure.
Consumers saving a lower proportion of their income.
A decrease in the marginal propensity to import.
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
70. All of the following are disadvantages of inflation EXCEPT which ONE?
a) It redistributes wealth from debtors to creditors.
b) It reduces international competitiveness.
c) Market price signals are distorted.
d) Fixed income earners experience a fall in real income.
71. An expansionary fiscal policy would be most likely to reduce unemployment if the country had:
a)
b)
c)
d)
A high marginal propensity to import
A low marginal propensity to save.
A high marginal tax rate.
A low marginal propensity to consume.
72. In order to finance an excess of expenditure over taxation receipts, a government could:
a)
b)
c)
d)
Reduce its current consumption expenditure
Issue government bonds
Raise direct taxes
Run an overdraft on its account at the World Bank
73. Which one of the following is an advantage for a country adopting a flexible exchange rate
system regime?
a)
b)
c)
d)
It provides certainty for organisations engaged in international trade
It eliminates transaction costs
Monetary policy can be used to manage to exchange rate
It reduces the need for central banks to keep reserves of foreign exchange
74. All of the following would tend to raise the exchange rate (appreciate) for a country’s currency
except one. Which ONE is the EXCEPTION?
a)
b)
c)
d)
A fall in the volume of imports
A risen in foreign investment in the country
A fall in domestic interest rates
A rise in the country’s invisible earnings
75. Keynesian theory of employment is based on the concept of -----------a)
b)
c)
d)
Aggregate Demand
Aggregate Supply
Aggregate Demand and Supply both
None
76. Which of the following are Causes of Excess Demand (Inflationary gap) except one:
a) Government expenditure > Government revenue
b) Increase in autonomous investment
c) Surplus on balance of payments
d) Increase in capital formation
e) All of the above
77. Suppose at the income level of $ 50,000 million, saving amounts to $ 11,000 million. An
income at $ 60,000 million, saving increased to $ 14,000 million. What is the marginal
propensity to save for the Saudi economy?
a) 0.5
b) 0.3
c)1.4
d) None of them
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
78. Which of the following statements is true concerning the consumption function?
a) It slopes upward.
b) Its slope equals the MPC.
c) It represents the direct (positive) relationship between consumption spending and the
level of real disposable income.
d) If the consumption function lies above the 45-degree line then saving is positive.
e) All of the above
79. If disposal income is $400 billion, autonomous consumption is $60 billion, and MPS is 0.2, what
is the level of saving?
a) $20 billion.
b) $210 billion.
c) $380 Billion. d) $590 billion
e) $780 billion.
80. Which of the following statements is true about Say's law?
a)
b)
c)
d)
It states that supply creates its own demand.
It states that demand creates its own supply.
It states that total output will always exceed total spending.
It states that consumption spending is the most volatile component of aggregate
expenditures.
e) It is a major proposition of the Keynesian model.
81. Which one of the following best describes the theory of comparative advantage in relation to the
production of cars?
a)
b)
c)
d)
A country can produce cars at a lower opportunity cost than any of its trading partners
A country can produce cars more cheaply than any other country can
A country can produce more cars than any other country can
A country has a higher opportunity cost of producing cars than any of its trading partners
82. Which of the following is the correct definition of the IS curve?
a) The IS curve represents the single level of output where financial markets are in
equilibrium.
b) The IS curve represents the combinations of output and the interest rate where the money
market is in equilibrium
c) The IS curve represents the single level of output where the goods market is in
equilibrium
d) The IS curve represents the combinations of output and the interest rate where the
goods market is in equilibrium
83. If the marginal propensity to consume is 0.25 (25 %) then the multiplier will bea) 2.5;
b) 5.0;
c) 0.2;
d) None of the above
84. In trade/ business cycle, the cycles follow these sequencea)
b)
c)
d)
Prosperity or boom → recession→ depression or slump and then →Recovery;
Prosperity or boom → depression or slump→ recession and then →Recovery.
Recession → depression or slump→ Recovery and then → Prosperity or boom
Recovery→ recession→ depression or slump and then → Prosperity or boom
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
85. The concepts of investment multiplier and accelerator are given bya) Prof. J. M. Keynes and Prof. J. M. Clark respectively;
b) Prof. R. H. Kahn and Prof. J. M. Keynes respectively;
c) Prof. J. M. Keynes has given these two concepts;
d) None of the above.
86. Following are the Functions of central Bank except one?
a)
b)
c)
d)
e)
Monopoly of note issue
Custodian of Nation’s Reserve of International
Lender of the Last Resort
Agency Functions
Clearing House Function
87. An increase in the money supply causes:
a)
b)
c)
d)
Interest rates to fall, investment spending to rise, and aggregate demand to rise
Interest rates to rise, investment spending to rise, and aggregate demand to rise
Interest rates to rise, investment spending to fall, and aggregate demand to fall
Interest rates to fall, investment spending to fall, and aggregate demand to fall
88. The Phillips curve describes the relationship between:
a) The federal budget deficit and the trade deficit
b) Savings and investment
c) The unemployment rate and the inflation rate
d) Marginal tax rates and tax revenues
89. A bond is:
a) A promise to pay back a loan over an unspecified period
b) Allows the firm to access funds with moliabilities
c) The only way a firm can raise funds
d) A document that promises to pay back a loan under specified terms over a specified
period of time
90. Which one of the following is not usually a source of long-term finance?
a)
b)
c)
d)
Bank overdrafts
Debentures
Preference shares
Mortgages
91. Keynes suggested that _______ income households consume a ________ proportion of their
income than ________ income households
a)
b)
c)
d)
low; smaller; high
low; larger; high
high; larger; low
low; smaller; middle
92. The ___________ lag for fiscal policy is generally ______ than it is for monetary policy.
a)
b)
c)
d)
Recognition; shorter
Recognition; longer
Implementation; shorter
Implementation; longer
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
93. Which of the following is included in M-1?
a) Gold
b) Credit cards
c) Checkable deposits
d) Money market mutual fund
e) Stock
94. Which of the following gives the correct relationship between nominal and real interest rates?
a)
b)
c)
d)
Real interest rate = nominal interest rate + expected inflation rate
Nominal interest rate = real interest rate + expected inflation rate
Expected inflation rate = nominal interest rate + real interest rate
Nominal interest rate = real interest rate — expected inflation rate
95. The effects of low real interest rates include all of the following EXCEPT which ONE?
a) Credit-based sales will tend to be high.
b) Nominal costs of borrowing will always be low.
c) Business activity will tend to increase.
d) Investment will be encouraged.
96. Fiscal policy refers to the:
a) Government's ability to regulate the functioning of financial markets.
b) Spending and taxing policies used by the government to influence the level of economy
activity.
c) Techniques used by firms to reduce its tax liability.
d) The policy by MAS to affect the cash rate.
97. If the economy were in recession, we would expect:
a) Government expenditure to be low and tax revenues to be low, probably leading to a
budget surplus.
b) Government expenditure to be high and tax revenues to be low, probably leading to a
budget surplus.
c) Government expenditure to be high and tax revenues to be low, probably leading to a
budget deficit.
d) Government expenditure to be high and tax revenues to be high, probably leading to a
budget deficit.
98. If the government wants to try to reduce unemployment, it could ________ spending and/or
taxes should be ________.
a) Decrease; increased
b) Decrease; decreased
c) Increase; increased
d) Increase; decreased
99. Which of the following is an example of discretionary fiscal policy?
a) An increase in unemployment benefit payments during a recession due to rising
unemployment
b) The tax increases to combat rising inflation
c) A decrease in income tax receipts during a recession because incomes are falling
d) An increase in income tax receipts during an expansion because incomes are rising
100.
What will be the future value of $ 100 at 5 % rate of interest after 2 years?
a) $ 110.00;
b) $ 90.00
c) $ 110.25;
d) None of the above.
Name:___________________________________ Sec:____ Date:__________ Subject: Business Economics
Total Time: 02 Hours
Total Marks: 100
Question
Answer
Question
Answer
1
D
51
B
2
C
52
A
3
B
53
E
4
A
54
C
5
A
55
D
6
D
56
C
7
A
57
D
8
B
58
D
9
C
59
B
10
C
60
D
11
C
61
D
12
D
62
C
13
D
63
C
14
C
64
C
15
E
65
C
16
E
66
B
17
D
67
A
18
B
68
A
19
C
69
A
20
C
70
A
21
C
71
B
22
D
72
D
23
C
73
C
24
C
74
C
25
C
75
A
26
D
76
B
27
B
77
E
28
C
78
A
29
B
79
A
30
B
80
A
31
B
81
C
32
B
82
B
33
B
83
A
34
D
84
A
35
C
85
D
36
B
86
A
37
C
87
C
38
C
88
D
39
A
89
A
40
D
90
B
41
B
91
D
42
B
92
C
43
B
93
B
44
D
94
B
45
D
95
B
46
C
96
C
47
D
97
D
48
A
98
B
49
B
99
B
50
B
100
D