Economics MCQs

Option A: rent on the factory

Option B: wages paid to factory labor

Option C: interest payments on borrowed financial capital

Option D: payments on the lease for factory equipment

Correct Answer: wages paid to factory labor ✔

Option A: is liner (a straight line)

Option B: could be any of these answers

Option C: becomes steeper as the quantity of output increases

Option D: become flatter as the quantity of output increases.

Correct Answer: becomes steeper as the quantity of output increases ✔

Option A: accounting profit will exceed economic profit

Option B: economic profit will always be zero

Option C: economic profit will exceed accounting profit

Option D: accounting profit will always be zero

Correct Answer: accounting profit will exceed economic profit ✔

Option A: Rs30,000

Option B: Rs35,000

Option C: Rs75,000

Option D: Rs70,000

Correct Answer: Rs75,000 ✔

Option A: implicit costs

Option B: variable costs

Option C: the sum of implicit and explicit costs.

Option D: explicit costs.

Correct Answer: explicit costs. ✔

Option A: lowest among the OECD countries

Option B: higher currently than it was in the 1960s and 1970s

Option C: is equivalent to Holland’s aid

Option D: None of the above statements is true

Correct Answer: None of the above statements is true ✔

Option A: decreasing autonomy of the nation-state involves

Option B: the increasing international integration of markets for goods services and capital

Option C: changes of a traditional culture of a country to a western culture

Option D: giving aid to poor countries to improve their economy politics and social status

Correct Answer: the increasing international integration of markets for goods services and capital ✔

Option A: the transportation and storage cost increased tremendously

Option B: proponents of basic-needs attainment opposed food-aid

Option C: U.S farm interests wanted to reduce surplus grain stocks

Option D: agricultural production suffered excessively due to weather changes

Correct Answer: U.S farm interests wanted to reduce surplus grain stocks ✔

Option A: the brain drains from LDCs to DCs

Option B: the price role of political and credit-market risk in many LDCs

Option C: the law of increasing returns that implies that the marginal productivity of capital is higher in LDCs

Option D: the fat that the DC capital market is perfectly competitive

Correct Answer: the price role of political and credit-market risk in many LDCs ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and III only

Option D: I, II, III and IV

Correct Answer: I, II, III and IV ✔

Option A: I and II only

Option B: III and IV only

Option C: I, II and III only

Option D: I, II, III and IV

Correct Answer: I, II, III and IV ✔

Option A: is technical aid given by IMF

Option B: is given directly by one country to another

Option C: is aid with repayment in inconvertible currency

Option D: is a loan at bankers’ standards

Correct Answer: is given directly by one country to another ✔

Option A: I and II only

Option B: II and III only

Option C: I and IV only

Option D: None of the above

Correct Answer: I and IV only ✔

Option A: and the dangers of free capital movements for LDCs with poorly developed financial institutions

Option B: and the dangers of a trade deficit

Option C: and the external openness of income growth among the poorest 40 percent of LDCs

Option D: and MNC domination and its effects on income distribution

Correct Answer: and the dangers of free capital movements for LDCs with poorly developed financial institutions ✔

Option A: investors are directly involved in managing the operations

Option B: as in direct investment investors export goods and services abroad

Option C: investors transfer the technology to local investors

Option D: investors have no control over operations

Correct Answer: investors have no control over operations ✔

Option A: technical assistance to stock market and financial market problems

Option B: loans for post-World War II reconstruction

Option C: short-term credit for international balance of payments deficits

Option D: bonds denominated in U.S dollars as a loan to LDCs

Correct Answer: short-term credit for international balance of payments deficits ✔

Option A: negative effect on economic growth during the simultaneous five-year period but has a significantly positive effect on growth in the subsequent five years

Option B: no effect on economic growth during the simultaneous five-year period but has a significantly negative effect on growth in the subsequent five years

Option C: a significantly positive effect on growth in the subsequent five years

Option D: an exponentially negative effect on growth ten years

Correct Answer: no effect on economic growth during the simultaneous five-year period but has a significantly negative effect on growth in the subsequent five years ✔

Option A: I and II only

Option B: II and IV only

Option C: I, II and III only

Option D: I, II and IV only

Correct Answer: II and IV only ✔

Option A: the capital accounts

Option B: the international balance of payments statements

Option C: the long-term current account

Option D: the trade accounts

Correct Answer: the international balance of payments statements ✔

Option A: own domestic savings and by inflows of capital from abroad

Option B: stock market and fiscal policy

Option C: savings from abroad and financial outflow

Option D: savings and financial liberalization

Correct Answer: own domestic savings and by inflows of capital from abroad ✔

Option A: I and II only

Option B: I, II and III only

Option C: I, II and IV only

Option D: I, II, III and IV only

Correct Answer: I, II and IV only ✔

Option A: I, II and III

Option B: I, II and IV

Option C: II, III and IV

Option D: I, II, III and IV

Correct Answer: I, II and IV ✔

Option A: During the 1980s OECD countries contributed four fifths of the world’s bilateral official development assistance to LDCs

Option B: In the early 1990s the OECD contributed 98 percent of all aid

Option C: The OECD aid increased from $6.9 billion in 1970 to $8.9 billion in 2001

Option D: In 2001, only Denmark Norway, Sweden, the Netherlands, and Luxembourg exceeded the aid target for LDCs

Correct Answer: The OECD aid increased from $6.9 billion in 1970 to $8.9 billion in 2001 ✔

Option A: an economy more open to foreign trade and investment faces a more inelastic demand for unskilled workers

Option B: employers and consumers can more readily replace domestic workers with foreign workers by investing abroad or buying imports

Option C: globalization increases job insecurity

Option D: financial liberalization in LDCs leads to collapse of the economy

Correct Answer: globalization increases job insecurity ✔

Option A: A government budget deficit

Option B: Capital flight

Option C: An increase in Private saving

Option D: A tariff

Correct Answer: A tariff ✔

Option A: Eu consumers who buy electronics from Japan

Option B: EU farmers who export grain

Option C: employees of EU car manufacturers

Option D: Shareholders of German carmaker BMW

Correct Answer: EU farmers who export grain ✔

Option A: A country’s trade policy has no impact on the size of its trade balance

Option B: None of these answers

Option C: A restrictive import quota decreases a country’s net exports

Option D: A restrictive imports quota increases a country’s net exports

Correct Answer: A. A country’s trade policy has no impact on the size of its trade balance ✔

Option A: UK net foreign investment is unchanged because only UK residents can after UK net foreign investment

Option B: UK net foreign investment rises

Option C: UK net foreign investment falls

Option D: None of the above

Correct Answer: UK net foreign investment falls ✔

Option A: The demand for pounds decreases and the pound depreciates

Option B: The Supply of pounds increases, and the pound depreciates

Option C: The Supply of pounds decreases, and the pound appreciates

Option D: The demand for Pounds increases and the pound appreciates

Correct Answer: The demand for Pounds increases and the pound appreciates ✔

Option A: depreciate and would increase UK net exports

Option B: appreciate and would increase UK net exports

Option C: depreciate and would decrease UK net exports

Option D: appreciate, but the total value of UK net export stays the same

Correct Answer: appreciate, but the total value of UK net export stays the same ✔

Option A: has no impact on the real interest rate and fails to crowed out investment

Option B: decreases the real interest rate and crowds out investment

Option C: None of these answers

Option D: Increases the real interest rate and crowds out investment

Correct Answer: Increases the real interest rate and crowds out investment ✔

Option A: decreases a country’s net exports and increases its long-run growth path

Option B: increases a country’s net exports and increases its long-run growth path

Option C: increases a country’s net exports and decreases its long-run growth path

Option D: decreases a country’s net exports and decreases its long-run growth path

Correct Answer: C. increases a country’s net exports and decreases its long-run growth path ✔

Option A: Foreigners who wish to buy assets in the UK

Option B: BAe Systems wishing to sell aircraft to Saudi Arabia

Option C: UK residents wishing to buy foreign Produced cars

Option D: Lenders of loanable funds

Correct Answer: BAe Systems wishing to sell aircraft to Saudi Arabia ✔

Option A: A tariff on sugar

Option B: All are examples of trade policy

Option C: capital flight because it increases a country’s net exports

Option D: an increase in the government budget deficit because it reduces a country’s net exports

Correct Answer: A tariff on sugar ✔

Option A: increase Pakistan’s net exports and Pakistan’s net capital outflow the same amount

Option B: Increase Pakistan’s net exports and decrease Pakistan’s net capital outflow

Option C: decreases Pakistan’s net exports and Pakistan’s net capital outflow the same amount

Option D: decrease Pakistan’s net exports and increase Pakistan’s net capital outflow

Correct Answer: A. increase Pakistan’s net exports and Pakistan’s net capital outflow the same amount ✔

Option A: The pound appreciates, and UK net exports rise

Option B: The pound appreciates, and UK net exports fall

Option C: The pound depreciates, and UK net exports rise

Option D: The pound depreciates, and UK net exports fall

Correct Answer: The pound appreciates, and UK net exports fall ✔

Option A: Net exports will rise

Option B: None of these answers

Option C: Net exports will fall

Option D: Net exports will remain unchanged

Correct Answer: Net exports will remain unchanged ✔

Option A: An increase in Pakistan’s net capital outflow increase the supply of rupees and the rupees depreciate

Option B: An increase in Pakistan’s net capital outflow increase the demand of rupees and the rupees appreciate

Option C: An increase in Pakistan’s net capital outflow increase the demand of rupees and the rupees depreciate

Option D: An increase in Pakistan’s net capital outflow increase the supply of rupees and the rupees appreciate

Correct Answer: A. An increase in Pakistan’s net capital outflow increase the supply of rupees and the rupees depreciate ✔

Option A: An increase in Pakistan’s net exports decreases the supply of rupees and the rupees depreciates

Option B: An increase in Pakistan’s net exports increase the demand for rupees and the rupees appreciates

Option C: An increase in Pakistan’s net exports increases the Supply of rupees and the rupees depreciates

Option D: An increase in Pakistan’s net exports decrease the demand for rupees and the rupees appreciates

Correct Answer: B. An increase in Pakistan’s net exports increase the demand for rupees and the rupees appreciates ✔

Option A: A country’s trade deficit and its government budget deficit

Option B: The fact that if a country has a trade deficit, its trading partners must also have trade deficits

Option C: the equality of a country’s saving deficit and its investment deficit

Option D: a country’s trade deficit and its net capital outflow deficit

Correct Answer: A. A country’s trade deficit and its government budget deficit ✔

Option A: Increase Pakistan’s net exports and decrease Pakistan’s net capital outflow

Option B: decreases Pakistan’s net exports and Pakistan’s net Capital outflow the Pakistan’s same amount

Option C: Increase Pakistan’s net exports and Pakistan’s net capital outflow the same amount

Option D: decreases Pakistan’s net exports and increase Pakistan’s net capital outflow

Correct Answer: B. decreases Pakistan’s net exports and Pakistan’s net Capital outflow the Pakistan’s same amount ✔

Option A: A decrease in the government budget deficit increase the real interest rate

Option B: An increase in the government budget deficit shifts the supply of loanable funds to the right

Option C: An increase in private saving shifts the supply of loanable funds to the left

Option D: An increase in the government budget deficit shifts the supply of loanable funds to the left

Correct Answer: An increase in the government budget deficit shifts the supply of loanable funds to the left ✔

Option A: A decrease in a country’s net capital outflow shifts the demand for loanable funds to the left

Option B: An increase in domestic investment shifts the demand for loanable funds to the right

Option C: An increase in a country’s net capital outflow shifts the supply of loanable funds to the left

Option D: An increase in a country’s net capital outflow raises its real interest rate

Correct Answer: C. An increase in a country’s net capital outflow shifts the supply of loanable funds to the left ✔

Option A: Solow residual

Option B: productivity paradox

Option C: technological followership

Option D: Stieglitz discrepancies

Correct Answer: productivity paradox ✔

Option A: price distortions

Option B: consumer surplus

Option C: shadow prices

Option D: exchange rates

Correct Answer: shadow prices ✔

Option A: scholarship for technical education

Option B: R&D in robotics

Option C: a new drug to cure AIDS

Option D: environmental pollution

Correct Answer: environmental pollution ✔

Option A: economies of scale

Option B: external economies

Option C: negative externality

Option D: net present value

Correct Answer: external economies ✔

Option A: Labor is often underemployed, having a low alternative cost

Option B: It is cheaper to hire labor in LDC because its productivity is relatively higher than in DCs

Option C: Adapting existing Western technology to LDC conditions requires little creativity

Option D: Labor is usually considered the scarce factor

Correct Answer: Labor is often underemployed, having a low alternative cost ✔

Option A: In 1990 the world had 98 mainline phones and 2 mobile phones per 1,000 people: in 2001 169 mainline and 153 mobiles per 1000

Option B: Mobile phones do not require the massive infrastructure investment that mainline telephone require

Option C: In 2001 the World information technology expenditures were about 1/20 of 1% of world gross investment

Option D: In 2001 internet users per 1000 people in middle income countries were greater than high income countries

Correct Answer: In 2001 internet users per 1000 people in middle income countries were greater than high income countries ✔

Option A: inadequate government bureaucracy

Option B: small size of infrastructure

Option C: too few innovative entrepreneurs

Option D: unsuitable technology

Correct Answer: All of the above are correct ✔

Option A: Dale Jorgenson

Option B: Joseph Stieglitz

Option C: Robert Solow

Option D: Theodore W. Schultz

Correct Answer: Robert Solow ✔

Option A: productivity paradox

Option B: absorptive capacity

Option C: the residual

Option D: uncertainly

Correct Answer: absorptive capacity ✔

Option A: a natural monopoly

Option B: an LDC’s limit of one firm to an industry

Option C: an individual firm facing a horizontal (perfectly elastic) demand curve in LDCs

Option D: The existence of oligopoly

Correct Answer: a natural monopoly ✔

Option A: mobile phone

Option B: electricity

Option C: water supply

Option D: postal service

Correct Answer: mobile phone ✔

Option A: 800

Option B: 40,000

Option C: more than zero but less than 800

Option D: less than zero

Correct Answer: 800 ✔

Option A: wage costs per unit of output

Option B: wage rate that prevails in LDCs

Option C: Wage rate divided by the productivity of labor

Option D: marginal product of labor divided by wage

Correct Answer: Wage rate divided by the productivity of labor ✔

Option A: maximum capital absorption

Option B: factor price distortions

Option C: engineering mentality

Option D: intermediate technology

Correct Answer: engineering mentality ✔

Option A: G-7 countries

Option B: countries with highest productivity growth in the world since 1960

Option C: countries with decreasing TFP growth since 1990s

Option D: countries with the lowest information technology equipment and software index prices

Correct Answer: G-7 countries ✔

Option A: an industrial sector and a manufacturing sector

Option B: a traditional agricultural sector and a modern industrial sector

Option C: state owner ship of the means of production

Option D: an industrial sector that concentrates on manufacturing and construction

Correct Answer: a traditional agricultural sector and a modern industrial sector ✔

Option A: with double capital and labor/

Option B: with a modern manufacturing sector as well as traditional agriculture sector

Option C: that specialize in labor intensive products more than capital intensive products

Option D: with foreign owned and domestically owned capital

Correct Answer: with a modern manufacturing sector as well as traditional agriculture sector ✔

Option A: 10

Option B: 2

Option C: no more than 1

Option D: 20

Correct Answer: 2 ✔

Option A: enough to supply only a small nonagricultural population

Option B: of zero

Option C: large enough of feed five other families

Option D: large enough to feed 25 other families

Correct Answer: enough to supply only a small nonagricultural population ✔

Option A: $145

Option B: $40,000

Option C: $25

Option D: $100

Correct Answer: $25 ✔

Option A: Germany

Option B: United Kingdom

Option C: Canada

Option D: Mexico

Correct Answer: Mexico ✔

Option A: I and II only

Option B: II and III only

Option C: I, II and III only

Option D: IV only

Correct Answer: II and III only ✔

Option A: Uses no mechanical power

Option B: May be enterprises with less than 10 workers

Option C: Production is capital intensive

Option D: Uses family workers

Correct Answer: Production is capital intensive ✔

Option A: the modern sector increases its output share relative to the traditional sector

Option B: agricultural sector uses modern equipment

Option C: agricultural sector hires labor economically

Option D: modern manufacturing sector is labor intensive

Correct Answer: the modern sector increases its output share relative to the traditional sector ✔

Option A: less than 10% of the labor force is in agriculture

Option B: the average agriculture family produces surplus large enough only to supply small non-agriculture population

Option C: One-third of the labor force produce food

Option D: share of labor force is about 30%

Correct Answer: the average agriculture family produces surplus large enough only to supply small non-agriculture population ✔

Option A: dual family

Option B: institutional family

Option C: extended family

Option D: two-tier family tree

Correct Answer: extended family ✔

Option A: government programs direct resources away from investment goods to consumer goods.

Option B: tariffs and quotas prevent dollars from leaving the country

Option C: the rate of growth of real GNP is greater than the rate of growth of population

Option D: the level of consumption expenditures rises relative to the level of saving

Correct Answer: the rate of growth of real GNP is greater than the rate of growth of population ✔

Option A: deficient infrastructures

Option B: low life expectancies

Option C: low savings

Option D: a per capital GNP of more than $900

Correct Answer: a per capital GNP of more than $900 ✔

Option A: causes development

Option B: is positively related to development

Option C: id inversely related to development

Option D: inhibits development

Correct Answer: is positively related to development ✔

Option A: income earned through foreign exchange

Option B: the number of dollars earned in industry

Option C: income earned within a country’s boundaries

Option D: goods received from the nation’s residents

Correct Answer: C. income earned within a country’s boundaries ✔

Option A: government programs direct resources away from investment goods to consumer goods.

Option B: tariffs and quotas prevent countries from trading and thus prevent dollars from leaving each country

Option C: the rate of growth in real GNP is greater than the rate of growth in the population

Option D: the level of consumption expenditures rises relative to the level of savings

Correct Answer: the rate of growth in real GNP is greater than the rate of growth in the population ✔

Option A: average annual investment made in production of exported commodities

Option B: proportion of the primary export commodity in total exports

Option C: ratio of four leading commodities to total merchandise exports

Option D: total annual investment made in production of exported commodities

Correct Answer: ratio of four leading commodities to total merchandise exports ✔

Option A: a temperate climate

Option B: natural resources

Option C: an adequate capital bases

Option D: technological advance

Correct Answer: a temperate climate ✔

Option A: I and II only

Option B: III and IV only

Option C: IV only

Option D: I, II, III and IV

Correct Answer: I, II, III and IV ✔

Option A: is productive activity to obtain private benefit from public action and resources

Option B: are the payments above the minimum essential to attract the resources to the market?

Option C: is the wage used to pay unskilled workers?

Option D: does not include monopoly profits

Correct Answer: are the payments above the minimum essential to attract the resources to the market? ✔

Option A: commodity exports as a percentage of GDP per capita of exporting country divided by importing country

Option B: export earnings as a ratio of population

Option C: total merchandise export divided by Gross National Income

Option D: food, raw materials minerals and organic oils and fat as a percentage of total merchandise exports

Correct Answer: commodity exports as a percentage of GDP per capita of exporting country divided by importing country ✔

Option A: approximated investment minus actual investment

Option B: inflow of investment from abroad

Option C: sum of previous gross investment minus depreciation

Option D: difference between GDP and capital consumption

Correct Answer: sum of previous gross investment minus depreciation ✔

Option A: rural politicians

Option B: rural cultivators

Option C: rural industrialist

Option D: rural, religious group

Correct Answer: rural cultivators ✔

Option A: convex

Option B: inverted U shaped

Option C: L-shaped

Option D: S-Shaped

Correct Answer: inverted U shaped ✔

Option A: 3.1 percent

Option B: 3.0 percent

Option C: 18.6 percent

Option D: 18.0 percent

Correct Answer: 3.1 percent ✔

Option A: increase expenditure on public education

Option B: eliminate civil war

Option C: All of these answers would increase growth

Option D: increase restrictions on the importing of American tractors and electronics

Correct Answer: increase restrictions on the importing of American tractors and electronics ✔

Option A: how hard we work:

Option B: our supply of capital because everything of value is produced by machinery

Option C: our productivity because our income is equal to what we produce

Option D: our supply of natural resources because they limit production

Correct Answer: our productivity because our income is equal to what we produce ✔

Option A: Productivity growth has been steady over the last 50 years

Option B: Productivity has been growing more slowly every decade since world War II

Option C: Productivity grew quickly in the 1950s and 1960s more slowly from the early 1970s through 1995 and then quickly again

Option D: Productivity grew slowly from the 1950s through the 1970s and then began to accelerate probably due to advances in computer technology

Correct Answer: Productivity grew quickly in the 1950s and 1960s more slowly from the early 1970s through 1995 and then quickly again ✔

Option A: There is no evidence, yet that rapid population growth stretches natural resources to the point that it limits growth in productivity

Option B: All of these answers

Option C: Rapid population growth may dilute the capital stock lowering productivity

Option D: Rapid population growth may promote technological progress increasing productivity.

Correct Answer: All of these answers ✔

Option A: doubling all of the inputs more than doubles output due to the catch-up effect

Option B: doubling all of the inputs has absolutely no impact on output because output is constant

Option C: doubling all of the inputs less than doubles output due to diminishing returns

Option D: doubling all of the input’s doubles output

Correct Answer: doubling all of the input’s doubles output ✔

Option A: labor

Option B: physical capital/worker

Option C: human capital/worker

Option D: natural resources/worker

Correct Answer: labor ✔

Option A: it no longer needs any human capital

Option B: capital becomes more productive due to the “catch-up- effect”

Option C: none of these answers

Option D: it may be harder for it to grow quickly because of the diminishing returns to capital

Correct Answer: it may be harder for it to grow quickly because of the diminishing returns to capital ✔

Option A: They save and invest an unusually high percentage of their GDP

Option B: They have always been wealthy and will continue to be wealthy, which is known as the “snowball effect”

Option C: They are imperialists and have collected wealth from previous victories in war

Option D: They have enormous natural resources.

Correct Answer: They save and invest an unusually high percentage of their GDP ✔

Option A: encourage foreigners to investment in your country

Option B: encourage saving and investment

Option C: nationalize major industries

Option D: encourage research and development

Correct Answer: nationalize major industries ✔

Option A: Megabank buys a new computer

Option B: Naila pays her university tuition fees.

Option C: OGDC leases a new oil field

Option D: Indus Motors buys a new drill press

Correct Answer: Naila pays her university tuition fees. ✔

Option A: None of these answers

Option B: There has been an increase in foreign portfolio investment in the UK

Option C: Once the plant starts producing cars UK GDP will rise less than UK GNP

Option D: once the plant starts producing cars UK GDP will rise more than UK GNP

Correct Answer: once the plant starts producing cars UK GDP will rise more than UK GNP ✔

Option A: Toyota builds a new plant in the north of England

Option B: EDF of France buys shares in Scottish & Southern Energy of the UK, and Scottish & Southern Energy uses the Proceeds to build a new hydro-electric power station in Scotland

Option C: Deutsche Bank of Germany buys some new software from UK Supplier

Option D: JCB builds a new plant near Manchester

Correct Answer: EDF of France buys shares in Scottish & Southern Energy of the UK, and Scottish & Southern Energy uses the Proceeds to build a new hydro-electric power station in Scotland ✔

Option A: A farmer sends his child to agricultural college and the child returns to work on the farm

Option B: A farmer hires another day laborer

Option C: A farmer buys another tractor

Option D: A farmer discovers that it is better to plant in the spring rather than in the fall

Correct Answer: A farmer discovers that it is better to plant in the spring rather than in the fall ✔

Option A: none of these answers

Option B: an ever-increasing population is constrained only by the food supply resulting in chronic faminies

Option C: technological progress will continuously generate improvement in productivity and living standards.

Option D: labor is the only true factor of production

Correct Answer: an ever-increasing population is constrained only by the food supply resulting in chronic faminies ✔

Option A: a renewable natural resource

Option B: physical capital

Option C: technology

Option D: a non-renewable natural resource

Correct Answer: a non-renewable natural resource ✔

Option A: Countries all have the same growth rate and level of output because any country can obtain the same factors of production

Option B: Countries have great variance in both the level and growth rate of GDP/person thus poor countries can become relatively rich over time

Option C: Countries may have different level of GDP/person but they all grow at the same reate

Option D: Countries may have a different growth rate but they all have the same level of GDP/person

Correct Answer: Countries have great variance in both the level and growth rate of GDP/person thus poor countries can become relatively rich over time ✔

Option A: a reduction in current investment

Option B: a reduction in current consumption

Option C: a reduction in taxes

Option D: a reduction in current saving

Correct Answer: a reduction in current consumption ✔