MACRO ECONOMICS AND FINANCIAL SYSTEM OF PAKISTAN STAGE-I

ISQ Examination (Summer-2009)

Q.1 Q.2 Q.3 State True or False in the answer column. Please write the alphabet of selected answer in the given space: A dialogue took place between two economists is as follows: Mr. A: The neo-classical model which is promoted by the IMF and its followers in developing countries needs to be re-assessed. The emphasis on macroeconomic stability, in particular controlling inflation should not be at the expense of growth in the developing countries such as Pakistan. The issue of macro stability is also very important. If that is ignored, the growth achieved shall falter in the long-run. I believe we should first look at achieving stability and arresting inflationary trend as major focus of our economic policy. We can not over-look stability question. However, we should not ignore more basic issues confronting our economy. Poverty rate has jumped from 23.9% to 37.5% in the course of three years. We need investment in infrastructure, human development projects and for improving living standard of poorer sections of society. I think if we are able to keep inflation and growing macro economic imbalances in check, we may then adopt policies aiming at achieving growth on sustainable basis. (09) (46)

Mr. B:

Mr. A:

Mr. B:

Based on the above discussion, Answer the following questions: i) Is there any trade-off between inflation and growth in Pakistans economy? Justify your view point with reasoning. Explain why macro economic stability is important for smooth functioning of economy.

(03)

ii)

(03)

Q.4

(A)

Outline the major factors responsible for liquidity pressures experienced by Banking System in Pakistan in recent past? (05) What are the implications of high fiscal deficits for monetary policy? Discuss in the context of Pakistan. (05) What does a balance of payments statement tell us? (02)

Q.4

(B)

Q.5

(A)

Q.5
Q.6 Q.6

(B)
(A) (B)

How does deficit in Balance of Payment influence Economic Activity? (03)

Explain that how the economic growth decreases poverty? What are the causes of Devaluation of Pakistan currency? (02) (02)

Q.7
Q.7

(A)
(B)

Evaluate the effect of Devaluation on the Trade and Economic growth. (02)
Why the financial intermediaries are less risky and provide liquidity to the savers? Explain. (03) Explain why it is not a sustainable policy to attempt to keep unemployment below its natural level according to the augmented Phillips Curve model. (04) The Government uses an income yardstick of a dollar-a-day per person to define poverty. But this is a very misleading figure in Pakistans case. Explain why? (03) What is the money multiplier? (02)

Q.8

(A)

Q.8

(B)

Q.8 Q.9

(C) (A)

Higher monetary growth will never affect unemployment, rather, it will be reflected in higher inflation. Explain. (03) Is GDP and GNP accurately measures human welfare? Support your answer with a suitable reason. (03)

Q.9

(B)

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