MCQOPTIONS
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MCQOPTIONS
This section includes 20 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Which of the following would probably cause the CPI to rise more than the GDP deflator in the Pakistan ? |
| A. | An increase in the price of BMWs produced in Germany and sold in the Pakistan |
| B. | An increase in the price of Peugeots produced in the Pakistan |
| C. | An increase in the price of helicopters purchased by the Pak Navy. |
| D. | An increased in the Price of domestically produced armoured vehicles sold exclusively to Iran |
| Answer» B. An increase in the price of Peugeots produced in the Pakistan | |
| 2. |
Under which of the following conditions would you prefer to be the lender ? |
| A. | The nominal rate of interest is 15 percent and the inflation rate is 14 percent |
| B. | The nominal rate of interest is 20 percent and the inflation rate is 25 percent |
| C. | The nominal rate of interest is 12 percent and the inflation rate is 9 percent |
| D. | The nominal rate of interest is 5 percent and the inflation rate are 1 percent |
| Answer» E. | |
| 3. |
Under Which of the following conditions would you prefer to be the borrower ? |
| A. | The nominal rate of interest is 12 percent and the inflation rate is 9 percent |
| B. | The nominal rate of interest is 20 percent and the inflation rate is 25 percent |
| C. | The nominal rate of interest is 5 percent and the inflation rate is 1 percent |
| D. | The nominal rate of interest is 15 percent and the inflation rate is 14 percent |
| Answer» C. The nominal rate of interest is 5 percent and the inflation rate is 1 percent | |
| 4. |
The Phillips curve shows the relationship between inflation and what ? |
| A. | The balance of trade |
| B. | The rate of growth in an economy |
| C. | The rate of price increase |
| D. | Unemployment |
| Answer» D. Unemployment | |
| 5. |
The effect of inflation on the price competitiveness of a country’s products may be offset by ? |
| A. | An appreciation of the currency |
| B. | A revaluation of the currency |
| C. | A depreciation of the currency |
| D. | Lower inflation abroad |
| Answer» E. | |
| 6. |
The “basket” on which the CPI is based is composed of ? |
| A. | consumer production |
| B. | Products purchased by the typical consumer |
| C. | raw materials purchased by firms |
| D. | total current production |
| E. | none of these answers |
| Answer» C. raw materials purchased by firms | |
| 7. |
Refer to Figure 24-1 What is the value of the basket in the base year ? |
| A. | Rs459.25 |
| B. | Rs418.75 |
| C. | Rs300 |
| D. | None of these |
| Answer» D. None of these | |
| 8. |
Menu costs in relation to inflation refers to ? |
| A. | Costs of finding better rates of return |
| B. | Costs of altering price lists |
| C. | Costs of money increasing its value |
| D. | Costs of revaluing the currency |
| Answer» C. Costs of money increasing its value | |
| 9. |
Inflation ? |
| A. | Reduce the cost of living |
| B. | Reduce the standard of living |
| C. | Reduce the price of products |
| D. | Reduce the purchasing power of a rupee |
| Answer» D. Reduce the purchasing power of a rupee | |
| 10. |
Inflation can be measured by all of the following except the ? |
| A. | All of these answers are used to measure inflation. |
| B. | consumer price index |
| C. | Producer price index |
| D. | GDP deflector |
| E. | finished goods price index |
| Answer» F. | |
| 11. |
In the short run unemployment may fall below the natural rate of unemployment if ? |
| A. | Nominal wages have risen less than inflation |
| B. | Nominal wages have risen at the same rate as inflation |
| C. | Nominal wages have risen more than inflation |
| D. | Nominal wages have risen less than unemployment |
| Answer» D. Nominal wages have risen less than unemployment | |
| 12. |
In 1989, the CPI was 124.0 in 1990, it was 130.7 What was the rate of inflation over this period ? |
| A. | 5.4 percent |
| B. | 30.7 percent |
| C. | You can’t tell without knowing the base year |
| D. | 5.1 percent |
| Answer» B. 30.7 percent | |
| 13. |
If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected ? |
| A. | none of these answers |
| B. | Workers will gain at the expense of firms |
| C. | neither workers nor firms will gain because the increase in wages in fixed in the labor agreement |
| D. | firms will gain at the expense of workers. |
| Answer» E. | |
| 14. |
If there is an increase in the price of apples which causes consumers to purchase fewer kilograms of apples and more kilograms of oranges, the CPI will suffer from ? |
| A. | none of these answers |
| B. | substitution bias |
| C. | base year bias |
| D. | bias due to unmeasured quality change |
| E. | bias due to the introduction of new goods. |
| Answer» C. base year bias | |
| 15. |
If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is ? |
| A. | 4 percent |
| B. | 10 percent |
| C. | -4 percent |
| D. | 3 percent |
| E. | 21 percent |
| Answer» B. 10 percent | |
| 16. |
If inflation is 8 percent and the real interest rate is 3 percent, then the nominal interest rate must be ? |
| A. | 3/8 percent |
| B. | 5 percent |
| C. | 11 percent |
| D. | 24 percent |
| Answer» D. 24 percent | |
| 17. |
If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected ? |
| A. | neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract |
| B. | None of these answers |
| C. | borrowers will gain at the expense of lenders |
| D. | lenders will gain at the expense of borrowers |
| Answer» E. | |
| 18. |
Costs of revaluing the currency |
| A. | Shift aggregate demand |
| B. | Shift aggregate supply |
| C. | Reduce the natural rate of unemployment |
| D. | Increase the productivity of employees |
| Answer» C. Reduce the natural rate of unemployment | |
| 19. |
An increase in injections into the economy may lead to ? |
| A. | An outward shift of aggregate demand- and demand-pull inflation |
| B. | An outward shift of aggregate demand and cost push inflation |
| C. | An outward shift of aggregate supply and demand-pull inflation |
| D. | An outward shift of aggregate supply and cost push inflation |
| Answer» B. An outward shift of aggregate demand and cost push inflation | |
| 20. |
An increase in aggregate demand is more likely to lead to demand pull inflation if ? |
| A. | Aggregate supply is perfectly elastic |
| B. | Aggregate supply is Perfectly inelastic |
| C. | Aggregate supply is unit elastic |
| D. | Aggregate supply is relatively elastic |
| Answer» C. Aggregate supply is unit elastic | |