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1.

Profit and loss-sharing is an element of this system:


A. Islamic B. Capitalistic

C. Socialistic D. None of these


Answer & Explanation

Answer: Option A

Explanation:

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2. Cash cannot be obtained from bank against:


A. Cross cheque B. Order cheque

C. Bearer cheque D. Traveller cheque


Answer & Explanation

Answer: Option A

Explanation:

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3. Commercial banks accept deposits and provide:


A. Money B. Cheque

C. Loans D. Bill of exchange


Answer & Explanation

Answer: Option C

Explanation:

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4. The banks can give loans:


A. Unlimited B. Equal to deposits
C. Less than deposits D. More than deposits
Answer & Explanation

Answer: Option D

Explanation:

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5. Banks discount it and advance loans:


A. Draft B. Bill of exchange

C. Pay order D. Good


Answer & Explanation

Answer: Option B

Explanation:

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6. Banks prepare their balance sheet:


A. Weekly B. Monthly

C. Quarterly D. Annually
Answer & Explanation

Answer: Option A

Explanation:

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7. Balance sheet of a bank has two parts:


A. Supply and demand for deposits B. Supply and demand of advances

C. Assets and liabilities D. Cash reserves and loans


Answer & Explanation
Answer: Option C

Explanation:

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8. When banks prepare their balance sheets, they show the money lent in:
A. Liabilities B. Assets

C. Both assets and liabilities D. None of these


Answer & Explanation

Answer: Option B

Explanation:

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9. The power of a bank to create credit is affected by:


A. The cash reserve requirement B. The amount of cash available

The number of branches of a


C. D. Both (a) & (b)
bank
Answer & Explanation

Answer: Option D

Explanation:

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10. Demand deposits are:


Money (they can be used to make
A. Bank notes B.
payments)

C. Considered as near money D. Legal money


Answer & Explanation

Answer: Option B
11. An asset is liquid when it is:
A. Being traded frequently B. Earning a good rate of return

Is money or easily converted into


C. D. All of the above
money
Answer & Explanation

Answer: Option C

Explanation:

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12. A bank has Rs. 5 million in cash. The minimum reserve ratio is 20%. What is
maximum potential increase in total deposits:
A. 0 B. 5m

C. 10 m D. 25 m
Answer & Explanation

Answer: Option D

Explanation:

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13. The following is not a bank liability:


A. Demand deposit B. Time deposit

C. Saving deposit D. Loans


Answer & Explanation

Answer: Option D

Explanation:

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14. When a commercial bank creates credit, it immediately raises:
A. Its assets B. Its liabilities

C. Money supply D. (a) and (b) of above


Answer & Explanation

Answer: Option D

Explanation:

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15. Which is the source of interest for a bank:


A. Advances B. Bills discounted

C. Investments D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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16. Commercial banks are able to create money by:


A. Printing money B. Making loans

C. Moral suasion D. Selling government bonds


Answer & Explanation

Answer: Option B

Explanation:

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17. Which is a function of a commercial bank:


A. Acting as a govt. banker B. Fixing the exchange rate
C. Issuing bank notes D. Making loans
Answer & Explanation

Answer: Option D

Explanation:

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18. When a commercial bank creates credit, its immediate effect is that it raises:
A. The exchange rate B. The interest rate

C. The money supply D. The real national income


Answer & Explanation

Answer: Option C

Explanation:

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19. Total number of bank branches in Pakistan is:


More than 5000 but less than More than 10,000 but less than
A. B.
10,000 15,000

More than 15,000 but less than More than 20,000 but less than
C. D.
20,000 25,000
Answer & Explanation

Answer: Option A

Explanation:

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20. Demand deposits mean:


A. Saving account B. Profit loss account

C. Chequeable deposits D. Time deposits


Answer & Explanation

Answer: Option C
21. Which is considered liability by a bank:
A. Loans B. Bank's building and equipment

C. Time deposit D. Securities


Answer & Explanation

Answer: Option C

Explanation:

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22. Demand deposits are money because:


A. They are backed by gold B. They are assets of banks

They can be used to make


C. D. All of the above
payments
Answer & Explanation

Answer: Option C

Explanation:

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23. Credit money is created by:


A. Central bank B. Commercial bank

C. Government D. All of the above


Answer & Explanation

Answer: Option B

Explanation:

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24. Credit money is created by:
A. Exchange bank B. Commercial bank

C. Finance companies D. None of these


Answer & Explanation

Answer: Option B

Explanation:

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25. Select the correct statement:


Credit money is better than legal Legal money is better than credit
A. B.
money money

Both legal money and credit


C. D. All money is evil
money are equally useful
Answer & Explanation

Answer: Option C

Explanation:

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26. Select the correct statement:


Commercial bank create paper
A. Central bank creates legal money B.
money

Finance companies create fake


C. D. None of the above is true
money
Answer & Explanation

Answer: Option A

Explanation:

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27. Select the correct statement:
Central bank creates convertible Commercial bank create
A. B.
money convertible money

C. Govt. creates paper money D. None of the above is true


Answer & Explanation

Answer: Option D

Explanation:

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28. Which type of cheque is more safe for transfer of money


A. Bearer cheque B. Traveller cheque

C. Order cheque D. Cross cheque


Answer & Explanation

Answer: Option D

Explanation:

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29. Which type of cheque is least safe for transfer of money:


A. Bearer cheque B. Traveller cheque

C. Order cheque D. Cross cheque


Answer & Explanation

Answer: Option A

Explanation:

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30. If a person is more interested to earn income, he should deposit his money in:
A. Demand deposit B. Time deposit
C. Saving account D. Profit-loss account
Answer & Explanation

Answer: Option B
31. If a person is interested that his amount should be readily available as soon as he needs
he should deposit his money in:
A. Demand deposit B. Time deposit

C. Saving account D. Profit-loss account


Answer & Explanation

Answer: Option A

Explanation:

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32. Which type of card is not issued by commercial banks:


A. Credit card B. Debit card

C. ATM card D. Green card


Answer & Explanation

Answer: Option D

Explanation:

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33. Which type of card is not issued by central banks:


A. Credit card B. Debit card

C. ATM card D. None is issued y it


Answer & Explanation

Answer: Option D

Explanation:
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34. Market rate of interest is:


A. Always higher than discount rate B. Always lower than discount rate

May be higher or lower than


C. Both are equal D.
discount rate
Answer & Explanation

Answer: Option A

Explanation:

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35. Most important source of income of commercial banks is:


A. Interest charged on loans B. Profit erned on investments

Income from collecting utility Income from reserves at central


C. D.
bills bank
Answer & Explanation

Answer: Option A

Explanation:

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36. Select the true statement:


The central bank charges high
The central bank does not charge
A. interest rate on loans to B.
interest on loans to banks
commercial banks

The central bank does not


C. advance loans to commercial D. None is true
banks
Answer & Explanation

Answer: Option D
Explanation:

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37. If you borrow from a bank the amount which the bank charges is called:
A. Bank rate B. Discount rate

C. Interest rate D. Borrowing rate


Answer & Explanation

Answer: Option C

Explanation:

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38. The rate charged by a central bank on loans is called:


A. Market rate B. Discount rate

C. Lending rate D. Tax rate


Answer & Explanation

Answer: Option B

Explanation:

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39. Changes in discount rate are brought about by State Bank to:
A. Control inflation B. Increase investment activity

C. Increase earnings of the bank D. (a) and (b) of above


Answer & Explanation

Answer: Option D

Explanation:

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40. Short term loans can be obtained in:
A. Stock market B. Money market

C. Capital market D. All the markets


Answer & Explanation

Answer: Option B
41. Long term loans can be obtained in:
A. Stock market B. Money market

C. Capital market D. Exchange market


Answer & Explanation

Answer: Option C

Explanation:

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42. Functions of commercial bank are:


Issue currency, create deposit Accept deposit, create deposit
A. B.
money and provide loans money and provide loans

Accept deposit, provide loans, Accept deposit, provide loans and


C. D.
export goods control foreign exchange
Answer & Explanation

Answer: Option B

Explanation:

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43. This is a difficulty of barter:


Lack of double coincidence of Difficulty to use larger scale in
A. B.
wants production

C. Lack of divisibility of many D. All of the above


goods
Answer & Explanation

Answer: Option D

Explanation:

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44. Velocity of circulation of money means:


A. Total demand for money B. Total supply of money

The average number of times a Annual increase in currency


C. D.
unit of money changes hands notes
Answer & Explanation

Answer: Option C

Explanation:

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45. Nationalisation of banks ws done in:


A. 1974 B. 1976

C. 1978 D. 1980
Answer & Explanation

Answer: Option A

Explanation:

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46. National Bank of Pakistan is:


A. Industrial bank B. Commercial bank

C. Central bank D. Investment bank


Answer & Explanation
Answer: Option B

Explanation:

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47. Total number of branches of Pakistani banks is approximately:


A. 3000 B. 9000

C. 15000 D. 21500
Answer & Explanation

Answer: Option B

Explanation:

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48. National Bank of Pakistan was established in:


A. 1949 B. 1959

C. 1969 D. 1970
Answer & Explanation

Answer: Option A

Explanation:

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49. The bank established for loans to very small enterprises is called:
A. Micro Finance Bank B. Modarba Bank

C. SME Bank D. First Mini Bank


Answer & Explanation

Answer: Option A
Explanation:

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50. Pakistan has a banking system:


A. Developed B. Underdeveloped

C. Very unorganised D. (a) and (c) of above


Answer & Explanation

Answer: Option A
51. Commercial banks in Pakistan are supervised by:
A. State Bank B. National Bank

C. Finance Minister D. World Bank


Answer & Explanation

Answer: Option A

Explanation:

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52. National Bank is a:


A. Public sector bank B. Private bank

C. Micro finance bank D. Specialised bank


Answer & Explanation

Answer: Option A

Explanation:

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53. First Women bank is:


A. Private bank B. Govt. Bank
C. Non-Scheduled Bank D. Investment Bank
Answer & Explanation

Answer: Option B

Explanation:

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54. Bank rate in Pakistan is:


A. 3% B. 13%

C. 23% D. 33%
Answer & Explanation

Answer: Option B

Explanation:

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55. State Bank was established in:


A. 1948 B. 1950

C. 1952 D. 1954
Answer & Explanation

Answer: Option A

Explanation:

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56. 10-rupee note is issued by:


A. National Bank B. State Bank

C. Govt. of Pakistan D. Governor State Bank


Answer & Explanation
Answer: Option B

Explanation:

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57. Acting as lender of last resort, a central bank lends to:


A. Money markets B. Stock exchange

C. Commercial banks D. Does not lend


Answer & Explanation

Answer: Option C

Explanation:

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58. Which statement is true of the relationship between bond prices and bond yields?
A. They vary inversely B. They tool vary directly

They are related in long run and


C. They are not related D.
not in the short run
Answer & Explanation

Answer: Option A

Explanation:

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59. Which is the most widely used of monetary policy:


A. Clearing house B. Open-market operations

C. Discount rate D. Issuing of notes


Answer & Explanation

Answer: Option B
Explanation:

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60. When the State Bank wants to decrease money supply in the country, it:
Buys govt. securities in stock
A. B. Sells govt. securities
market

C. Lowers discount rate D. (b) and (c) of above


Answer & Explanation

Answer: Option D
61. Monetary policy consists of:
A. Decreasing taxes B. Changing total money supply

C. Checking commercial banks D. Printing of money


Answer & Explanation

Answer: Option B

Explanation:

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62. State Bank of Pakistan has departments:


A. Issue and banking department B. Issue and research department

Issue, research and banking


C. Banking and research department D.
department
Answer & Explanation

Answer: Option D

Explanation:

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63. Central bank's rate of lending to commercial banks is called


A. Interest rate B. Discount rate
C. Money rate D. Control rate
Answer & Explanation

Answer: Option B

Explanation:

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64. When a central bank wants to increase money supply in circulation:


A. Purchases govt. securities B. Lowers bank rate

Directs banks to advance more


C. D. (a) and (b) of above
loans
Answer & Explanation

Answer: Option D

Explanation:

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65. State Bank of Pakistan is run by:


A. Board of directors B. Board of governors

C. Board of managers D. Board of bankers


Answer & Explanation

Answer: Option A

Explanation:

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66. Credit money is controlled by:


A. Government B. Commercial banks

C. Central bank D. Markets


Answer & Explanation
Answer: Option C

Explanation:

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67. Every country establishes central bank to:


A. Issue notes B. Supervise commercial banks

C. Give loans to business D. (a) and (b) of above


Answer & Explanation

Answer: Option D

Explanation:

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68. It is NOT an instrument of monetary policy:


A. Bank rate B. Open market operations

C. Change in reserve ratio D. Issue notes


Answer & Explanation

Answer: Option D

Explanation:

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69. It creates credit:


A. Central bank B. Commercial bank

C. Government D. Stock exchange


Answer & Explanation

Answer: Option B
Explanation:

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70. Which is a monetary measure to increase employment:


A. Increase in govt. expenditure B. Reduce govt. expenditure

C. Increase in interest rate D. Reducing interest rate


Answer & Explanation

Answer: Option D
71. In order to reduce consumer borrowing this is raised:
A. Commercial bank deposits B. Government spending

C. Interest rate D. The exchange rate


Answer & Explanation

Answer: Option C

Explanation:

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72. Treasury bill is used for:


A. Getting short term loans B. Getting long germ loans

Treasury bill is not credit


C. D. Treasury bill is a govt. tax bill
instrument
Answer & Explanation

Answer: Option A

Explanation:

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73. Out of the following the only recognised legal tender is:
A. Cheque B. Bank notes
C. Draft D. Credit card
Answer & Explanation

Answer: Option B

Explanation:

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74. Open Market Operation is:


Buying and selling bills of Buying and selling govt.
A. B.
exchange securities

Buying and selling shares of Buying and selling foreign


C. D.
companies exchange
Answer & Explanation

Answer: Option B
1. Rupee is a coin:
A. Full value B. Token money

C. Credit money D. Convertible


Answer & Explanation

Answer: Option B

Explanation:

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2. Cash cannot be directly drawn from a bank against:


A. Cross cheque B. Order cheque

C. Bearer cheque D. Traveller cheque


Answer & Explanation

Answer: Option A
Explanation:

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3. Money material should be:


A. Abundant B. Scarce

C. Beautiful D. Heavy
Answer & Explanation

Answer: Option B

Explanation:

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4. In Pakistan money of account is:


A. Paisa B. Rupee

C. Gold D. Dollar
Answer & Explanation

Answer: Option B

Explanation:

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5. If no money is used to exchange goods, it is called:


A. Barter B. Currency

C. Black market D. Free trade


Answer & Explanation

Answer: Option A

Explanation:

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6. Which is not the function of money:
A. Make demand and supply equal B. Store of value

C. Medium of exchange D. Measure of value


Answer & Explanation

Answer: Option A

Explanation:

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7. Which is money:
A. Check B. Credit card

C. Currency D. Prize bond


Answer & Explanation

Answer: Option C

Explanation:

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8. Convertible money means:


A. It can buy goods B. Govt. can give gold against it

C. Illegal money D. Low value money


Answer & Explanation

Answer: Option B

Explanation:

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9. Barter has the defect:


A. Goods exchanged are of inferior B. Goods cannot be exchanged for
quality services

Lack of common measure of


C. D. None of the above
value
Answer & Explanation

Answer: Option C

Explanation:

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10. Legal money is called so because:


The buyer must pay in that
A. B. Can be converted into gold
money

Sellers do not accept any other


C. D. It is official medium of exchange
money
Answer & Explanation

Answer: Option D
11. It is the medium of exchange:
A. Black money B. Near money

C. Currency D. Foreign exchange


Answer & Explanation

Answer: Option C

Explanation:

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12. The govt. can control inflation by:


A. Increasing demand for goods B. Increasing supply of goods

C. Increasing money supply D. Decreasing taxes


Answer & Explanation
Answer: Option B

Explanation:

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13. Government of Pakistan issues currency on the basis of:


Availability of gold in the Availability of dollars in the
A. B.
country country

C. Demand for money in the country D. Tax collection


Answer & Explanation

Answer: Option C

Explanation:

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14. Quantity of money has relation with value of money:


A. Direct B. Indirect

C. Inverse D. No relation
Answer & Explanation

Answer: Option C

Explanation:

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15. Commercial banks create:


A. Credit money B. Token money

C. Legal money D. Do not create money


Answer & Explanation

Answer: Option A
Explanation:

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16. Cheque is:


A. Legal money B. Credit money

C. Paper money D. Not money


Answer & Explanation

Answer: Option D

Explanation:

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17. The most important feature of money:


A. General acceptability B. Convertibility into gold

C. Store of value D. Medium of exchange


Answer & Explanation

Answer: Option A

Explanation:

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18. It can change money supply:


A. National Assembly B. Supreme Court

C. Government D. State Bank


Answer & Explanation

Answer: Option D

Explanation:

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19. Which of the following increases money supply in the country?
A. Purchase of bonds by State Bank B. Sale of bonds by State Bank

C. Increase in discount rate D. Decrease in taxes


Answer & Explanation

Answer: Option A

Explanation:

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20. Paper money came into use:


A. 100 years ago B. 200 years ago

C. 1000 years ago D. 2000 years ago


Answer & Explanation

Answer: Option B
21. Which property the paper money does not possess:
A. Acceptability B. Divisibility

C. Duability D. Portability
Answer & Explanation

Answer: Option C

Explanation:

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22. A saving account in a bank represents the function of money:


A. A measure of value B. A medium of exchange

C. A standard for deferred payments D. Store of value


Answer & Explanation
Answer: Option D

Explanation:

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23. A student records her income and spending for past month, she uses the funtion of
money
A. Medium of exchange B. Standard of deferred payments

C. Store of value D. Unit of account


Answer & Explanation

Answer: Option D

Explanation:

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24. It implements monetary policy of the country:


A. Central bank B. Commercial banks

C. Specialised bank D. Finance department


Answer & Explanation

Answer: Option A

Explanation:

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25. Which property paper money does NOT Possess


A. Acceptability B. Divisibility

C. Durability D. Portability
Answer & Explanation

Answer: Option C
Explanation:

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26. Anything used as money must be:


A. Fixed in value B. Fixed in supply

C. Legal tender D. Readily acceptable


Answer & Explanation

Answer: Option D

Explanation:

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27. What will promote savings?


A. Increase in credit facilities B. Increase in taxation

C. Increase in personal incomes D. Rising prices


Answer & Explanation

Answer: Option C

Explanation:

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28. Treasury Bill is a document used for:


A long-term loan to the
A. A short-term loan to the exporter B.
government

A short-term loan to the A short-term loan to a govt.


C. D.
government employee
Answer & Explanation

Answer: Option C

Explanation:
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29. Which does NOT represent a method of payment?


A. Cheque B. Saving certificate

C. Currency note D. Bill of exchange


Answer & Explanation

Answer: Option B

Explanation:

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30. Which is NOT a desirable characteristic of money?


A. Portable B. Uniform

C. Easily recognised D. Easily duplicated


Answer & Explanation

Answer: Option D
31. Speculative demand for money depends upon:
A. Income B. Investment

C. Rate of interest D. Central bank


Answer & Explanation

Answer: Option C

Explanation:

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32. If money supply in a country decreases:


A. Prices will rise B. Prices will fall

C. Rate of interest falls D. (b) and (c) of above


Answer & Explanation
Answer: Option B

Explanation:

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33. In the equation MV = PY, V represents:


A. Value of money B. Velocity of circulation of money

C. Variation of nation income D. All of the above


Answer & Explanation

Answer: Option B

Explanation:

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34. In the equation MV = PY, M represents:


A. Money supply B. Money demand

C. Maximum output D. Minimum output


Answer & Explanation

Answer: Option A

Explanation:

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35. Accourding to Keynes, motives for holding money are:


A. Two B. Three

C. Four D. Five
Answer & Explanation

Answer: Option B
Explanation:

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36. Quantity Theory of Money explains that:


Value of money depends upon Rate of interest depends upon
A. B.
quantity of money quantity of money

Quantity of investment depends Supply of money depends upon


C. D.
upon quantity of money quantity of money
Answer & Explanation

Answer: Option A

Explanation:

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37. Cross cheque has a cross sign (X) in the:


A. Right side upper corner B. Right side lower corner

C. Left side upper corner D. It does not have cross sign (X)
Answer & Explanation

Answer: Option D

Explanation:

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38. Cross cheque means:


Cash cannot be directly drawn
A. It has been cancelled B.
from the bank

It has two lines drawn in left


C. D. (b) and (c) of above
upper corner
Answer & Explanation

Answer: Option D
Explanation:

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39. It is true to say about kinds of inflation:


Demand pull and cost push Demand pull and cost push
A. B.
inflation industry

Demand pull and income pull


C. D. None of the above
inflation
Answer & Explanation

Answer: Option A

Explanation:

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40. Liquidity of a monetary asset means:


A. Velocity of circulation of money B. Easy availability of oney

Ready acceptability of monetary The monetary asset has lost it


C. D.
asset value
Answer & Explanation

Answer: Option C
41. Barter means:
Trade through metallic money Trade of goods only excluding
A. B.
only services

C. Trade of very low value goods D. Trade without use of money


Answer & Explanation

Answer: Option D

Explanation:

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42. With reference to currency system of a country token money means:


The money which has no
A. Token tax B.
purchasing power

The money which has higher face Advance payment to purchase


C. D.
value something
Answer & Explanation

Answer: Option C

Explanation:

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43. Ten-rupee note is:


A. Token money B. Credit money

C. Legal money D. (a) and (c) of above


Answer & Explanation

Answer: Option D

Explanation:

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44. Paper money in Pakistan is:


A. Convertible B. Inconvertible

C. Linked to gold D. None of the above


Answer & Explanation

Answer: Option B

Explanation:

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45. Government securities:


A. Mean currency B. Are near money
Are bought and sold on stock
C. D. (b) and (c) of above
exchange market
Answer & Explanation

Answer: Option D

Explanation:

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46. Which is the characteristic of a good money:


A. Has good design B. Has high value

C. Has a fixed value in gold D. Is readily accepted by people


Answer & Explanation

Answer: Option D

Explanation:

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47. This is NOT money


A. Currency B. Prize bond

C. Demand deposit in a bank D. Coins


Answer & Explanation

Answer: Option B

Explanation:

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48. Cross cheque:


A. Is issued only by a business firm B. Is not accepted by banks

Ensures immediate payment of


C. D. None of the above
cash to the holder
Answer & Explanation

Answer: Option D

Explanation:

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49. This is a characteristic of good money:


A. High intrinsic value B. Liquidity

C. Attractive design D. Easy to duplicate


Answer & Explanation

Answer: Option B

Explanation:

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50. This is a characteristic of good money:


A. High intrinsic value B. General acceptability

C. Attractive design D. High purchasing power


Answer & Explanation

Answer: Option B
51. It is a kind of money:
A. Credit money B. Discredit money

C. Trust money D. False money


Answer & Explanation

Answer: Option A

Explanation:

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52. It is included in kinds of money:


A. Legal money B. Credit money

C. Token money D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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53. In payment of debt, people can use this kind of money:


A. Legal money B. Credit money

C. Real money D. (a) and (b) of the above


Answer & Explanation

Answer: Option D

Explanation:

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54. Purchasing power of money during deflation is:


A. Reduced B. Increased

C. Constant D. Fluctuating
Answer & Explanation

Answer: Option B

Explanation:

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55. Velocity of circulation of money means the number of times a unit of money
A. Changes hands daily B. Changes hands monthly
C. Changes hands annually D. Changes purchasing power
Answer & Explanation

Answer: Option C

Explanation:

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56. The equation of exchange PT = MV was given by:


A. Fisher B. Crowther

C. Kuznet D. Keynes
Answer & Explanation

Answer: Option A

Explanation:

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57. Value of money in Pakistan is determined by:


A. Govt. of Pakistan B. State Bank

C. General price level D. Value of doller


Answer & Explanation

Answer: Option C

Explanation:

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58. When value of money falls, they benefit more:


A. Farmers B. Industrialist

C. Lenders D. Debtors
Answer & Explanation
Answer: Option D

Explanation:

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59. When the nation's money supply is Rs. 1200 billion and GDP is Rs. 4800 billion,
velocity of circulation money is:
A. 0.25 B. 4

C. 0.4 D. 4 billion rupees


Answer & Explanation

Answer: Option B

Explanation:

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60. Which one is equation of exchange?


A. PT = MV B. PV = MT

C. PM = TV D. None of these
Answer & Explanation

Answer: Option A
1. Balance of payments of a country includes:
A. Current account B. Moentary account

C. Capital account D. All of above


Answer & Explanation

Answer: Option D

Explanation:

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2. Balance of payments of a country includes:


A. Balance of trade B. Capital receipts and payments

C. Saving and investment account D. Both (a) and (b)


Answer & Explanation

Answer: Option D

Explanation:

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3. Final balance of payments of a country is:


A. Always balanced B. Always deficit

C. Always surplus D. Fluctuates


Answer & Explanation

Answer: Option A

Explanation:

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4. Balance of payments of a country has parts:


A. 2 B. 3

C. 4 D. 5
Answer & Explanation

Answer: Option B

Explanation:

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5. Exchange rate for currencies is determined by supply and demand in system of:
A. Fixed exchange rate B. Flexible
C. Constant D. Govt. regulated
Answer & Explanation

Answer: Option B

Explanation:

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6. If GNP of Pakistan rises, it will encourage:


A. Exports B. Imports

C. Both D. None of these


Answer & Explanation

Answer: Option C

Explanation:

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7. A country that does not trade with other countries is called an economy:
A. Open B. Closed

C. Independent D. None of these


Answer & Explanation

Answer: Option B

Explanation:

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8. If Japanese import more goods from Pakistan (other things remain same)
Our balance of payments will
A. B. Japan's BOP will deteriorate
improve

C. Our BOP will deteriorate D. (a) and (b) of above


Answer & Explanation
Answer: Option D

Explanation:

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9. Invisible items in balance of payments include:


A. Foreign remittances B. Income from tourists

C. Internet charges D. All the three


Answer & Explanation

Answer: Option D

Explanation:

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10. Pakistan follows the policy of:


A. Fixed exchange rate B. Flexible exchange rate

C. Controlled exchange rate D. Increasing exchange rate


Answer & Explanation

Answer: Option B
11. It helps countries to meet deficit in balance of payments:
A. IMF B. WTO

C. World Bank D. UNO


Answer & Explanation

Answer: Option A

Explanation:

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12. The balance of payments of country means


Balance in income and Balance in demand and supply of
A. B.
expenditure of govt. money

Balance in export and import The annual account of foreign


C. D.
earnings trade
Answer & Explanation

Answer: Option D

Explanation:

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13. Pakistan's exports are part of our GDP:


A. 5% B. 15%

C. 25% D. 35%
Answer & Explanation

Answer: Option B

Explanation:

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14. What would cause a country's exchange rate to fall:


An increased demand for its An increased demand for its
A. B.
exports imports

C. An increased in flow of capital D. None of the above


Answer & Explanation

Answer: Option B

Explanation:

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15. Which of the following must always balance:


A. Balance of visible trade B. Balance of invisible trade

C. Balance on the current account D. Balance of payments


Answer & Explanation

Answer: Option D

Explanation:

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16. What will be expected result if the value of rupee falls against dollar?
The price of Pakistani goods in The price of American goods in
A. B.
USA will rise USA will fall

The price of American goods in The price of American goods in


C. D.
USA with fall Pakistan will rise
Answer & Explanation

Answer: Option D

Explanation:

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17. If Toyota Company, establishes a factory in Pakistan, this will be recroded in balance
of payments in the section:
A. Capital account B. Visible balance

C. Invisible balance D. Official financing


Answer & Explanation

Answer: Option A

Explanation:

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18. If CDA (Capital Development Authority, Islamabad) gets a loan from World Bank for
roads, it will be recorded in the balance of payments in section:
A. Capital account B. Visible balance

C. Invisible balance D. Official financing


Answer & Explanation

Answer: Option A

Explanation:

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19. Which of the following must always balance?


A. Balance of visible trade B. Balance of invisible trade

C. Balance on the current balance D. Balance of payments


Answer & Explanation

Answer: Option D

Explanation:

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20. Which of the following compares the average price of exports to average price of
imports?
A. The balance of payments B. The balance of trade

C. The exchange rate D. The terms of trade


Answer & Explanation

Answer: Option D
21. IMF represents
A. International Monetary Fund B. International Money Flow

C. International Money Forum D. International Monetary Finance


Answer & Explanation

Answer: Option A
Explanation:

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22. Flexible exchange rate system has the advantage:


Automatic adjustment of balance
A. B. Easy to borrow from world bank
of payments

C. Encourages exports D. None of the above


Answer & Explanation

Answer: Option A

Explanation:

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23. Fixed exchange rate system has the advantage:


Automatic adjustment of balance Increases govt. control over
A. B.
of payments foreign trade

Discourages unnecessary
C. speculation about future trade D. (b) and (c) of above
deals
Answer & Explanation

Answer: Option D

Explanation:

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24. Export of goods is called trade in:


A. Visible goods B. Invisible goods

C. Basic goods D. Real goods


Answer & Explanation

Answer: Option A
Explanation:

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25. Export of goods is called trade in:


A. Visible goods B. Invisible goods

C. Basic goods D. Non-real goods


Answer & Explanation

Answer: Option B

Explanation:

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26. Visible goods are recorded in this part of balance of payments account:
A. Current account B. Capital account

C. Govt. account D. Official account


Answer & Explanation

Answer: Option A

Explanation:

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27. Visible exports include:


A. Remittance B. Computer hardware

C. Computer software D. Transport cost


Answer & Explanation

Answer: Option B

Explanation:

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28. Visible imports include:
A. Remittance B. Machinery

C. Computer software D. Transport cost


Answer & Explanation

Answer: Option B

Explanation:

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29. If balance of payments of country is in deficit, then:


Country can increase money
A. Current account will be in deficit B.
supply to meet deficit

The country can borrow from


C. D. (a) and (c) of above
abroad
Answer & Explanation

Answer: Option D

Explanation:

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30. The balance of payments account of a country includes:


Official transfer of foreign
A. B. Smuggling transactions
exchange

C. Loans and aid D. Both a and c of the above


Answer & Explanation

Answer: Option D
31. Foreign exchange reserves increase if:
Exports increase imports remain
A. Govt. increases taxes B.
the same
Imports increase exports remain
C. D. (a) and (b) of above
the same
Answer & Explanation

Answer: Option B

Explanation:

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32. The receipts and payments for goods exported and imported are counted in:
A. Trade account B. Capital account

C. Current account D. Monetary account


Answer & Explanation

Answer: Option A

Explanation:

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33. IMF has given loan to Pakistan. It will improve Pakistan's:


A. Current account B. Capital account

C. Overall balance of payments D. (b) and (c) of above


Answer & Explanation

Answer: Option D

Explanation:

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34. IMF gives loans:


To fill gap in balance of
A. B. To fill gap in government budget
payments

C. To decrease inflation D. To increse employment


opportunities
Answer & Explanation

Answer: Option A

Explanation:

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35. In capitalism there is sovereignty of:


A. Producer B. Consumer

C. Government D. Businessmen
Answer & Explanation

Answer: Option B

Explanation:

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36. Basic principle of Islamic economic system is:


A. Equality B. Justice

C. High profit D. Less consumption


Answer & Explanation

Answer: Option B

Explanation:

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37. In capitalistic system, prices of goods are determined by:


A. Sellers B. Buyers

C. Government D. Forces of demand and supply


Answer & Explanation
Answer: Option D

Explanation:

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38. In socialistic system, prices of goods are determined by:


A. Sellers B. Buyers

C. Government D. Forces of demand and supply


Answer & Explanation

Answer: Option C

Explanation:

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39. In working of markets, the Islamic system is nearer to:


A. Capitalism B. Socialism

C. Mixed economy D. None of the above


Answer & Explanation

Answer: Option C

Explanation:

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40. Which is the basic economic problem, which is common in all economic systems:
A. Allocation of scarce resources B. Elimination of inflation

C. To increase exports D. To reduce taxation


Answer & Explanation

Answer: Option A
41. In a country like Pakistan:
All economic decisions are made
A. B. There is no planning
through markets

Govt. owns most of the means of


C. D. There is reliance on market
production
Answer & Explanation

Answer: Option D

Explanation:

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42. In Islamic economic system:


All economic decisions are made
A. B. There is no planning
through markets

Govt. owns most of the means of


C. D. There is reliance on market
production
Answer & Explanation

Answer: Option D

Explanation:

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43. Capitalism is defined as an economic system where there is:


A. A lack of planning B. A reliance over free market

C. Private ownership of property D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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44. Pakistan having a:


A. Mixed economy B. Capitalistic economy

C. Socialistic economy D. Islamic economy


Answer & Explanation

Answer: Option D

1. Every factor of production gets reward equal to:


A. Value of average product B. Value of marginal product
C. Value of total product D. Total revenue
Answer & Explanation
Answer: Option A

Explanation:

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2. Under perfect competition, demand for a factor is its:


A. MRP curve B. ARP curve
C. TRP curve D. TR - TC
Answer & Explanation
Answer: Option A

Explanation:

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3. We should employ units of a factor to a point where:


A. MR is negative B. MP is equal to price of the factor
C. MP is positive D. MP is rising
Answer & Explanation
Answer: Option B

Explanation:

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4. If marginal product of labour rises because of new technology:


A. Wages will rise B. Wages will fall
C. Wages will be unaffected D. May rise or fall
Answer & Explanation
Answer: Option A

Explanation:

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5. One of the following is NOT a assumption of the marginal productivity theory:


A. Units of factor are homogeneous B. Mobility of factor
C. Low price of factor D. Perfect competition
Answer & Explanation
Answer: Option C

Explanation:

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6. Increasing the minimum wage for workers will:


A. Sole the unemployment problem B. Result in scarcity of workers
C. Cause a substitution of capital for labour D. Decrease the MP of those
workers
Answer & Explanation
Answer: Option C
1. The contribution of industry in our GDP is:
A. 9% B. 19%

C. 29% D. 39%
Answer & Explanation

Answer: Option B

Explanation:

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2. The percentage of our labour force working in agriculture is:


A. 14% B. 24%

C. 34% D. 44%
Answer & Explanation

Answer: Option D

Explanation:

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3. The government spends on education percentage of GDP:


A. 2.5 B. 5.5

C. 8.5 D. 11.5
Answer & Explanation

Answer: Option A

Explanation:

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4. The lower literacy rate in females is due to:


Lack of access to educational
A. B. Parallel ignorance
institutions

C. Discriminatory social norms D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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5. Life expectancy in Pakistan is (in years):


A. 46 B. 56

C. 66 D. 76
Answer & Explanation

Answer: Option C

Explanation:

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6. Public spending on health is:


A. Less than 1% B. More than 1 but less than 2%

C. More than 2 but less than 3% D. More than 3


Answer & Explanation

Answer: Option A

Explanation:

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7. Infant mortality rate in Pakistan is:


A. 45 B. 65
C. 85 D. 105
Answer & Explanation

Answer: Option B

Explanation:

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8. Life expectancy in Pakistan is:


A. Less than 60 years B. Between 60 to 70 years

C. Between 70 and 80 years D. More than 80 years


Answer & Explanation

Answer: Option B

Explanation:

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9. Environment includes:
A. Ecosystems B. Wildlife

C. Forests D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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10. Environment deterioration is occurring because of:


A. Lack of education B. Population pressure

Under utilisation of natural


C. D. (a) and (b) of above
resources
Answer & Explanation
Answer: Option D
11. Forests in Pakistan are decreasing because:
A. Population pressure B. Poor conservation planning

C. Climatic changes D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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12. Forest cover in Pakistan is:


A. 2% B. 4%

C. 6% D. 8%
Answer & Explanation

Answer: Option B

Explanation:

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13. Expenditure on health as percentage of GDP is:


A. Less than 4% B. More than 4 but less than 8%

C. More than 8 but less than 12% D. More than 12%


Answer & Explanation

Answer: Option A

Explanation:

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14. Many people do not send their children to schools because of:
A. Their own illiteracy B. Harsh techers

C. Poverty D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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15. Private sector participation is expanding in:


A. Education B. Health

C. Environment D. Both (a) and (b)


Answer & Explanation

Answer: Option D

Explanation:

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16. People do not care for environment problems because of


A. Lack of education B. Fear of taxes

C. Poverty D. (a) and (b) of above


Answer & Explanation

Answer: Option D

Explanation:

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17. There are stock exchanges in Pakistan:


A. 2 B. 3
C. 4 D. 5
Answer & Explanation

Answer: Option B

Explanation:

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18. Literacy rate is lower in:


A. Males B. Females

C. Urban areas D. (b) and (c) of above


Answer & Explanation

Answer: Option B
1. Pakistan's saving rate is:
A. 5% B. 15%

C. 25% D. 35%
Answer & Explanation

Answer: Option B

Explanation:

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2. Pakistan's per capita income at constant prices in rupees is:


A. Rs.32,000 B. 62,000

C. 92,000 D. 9,000
Answer & Explanation

Answer: Option A

Explanation:

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3. Largest sector of Pakistan economy is:
A. Agriculture B. Industry

C. Transport D. Services
Answer & Explanation

Answer: Option A

Explanation:

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4. In the world population-wise Pakistan is:


A. 3rd B. 4th

C. 6th D. 8th
Answer & Explanation

Answer: Option C

Explanation:

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5. Population growth rate in Pakistan is:


A. 1% B. 2%

C. 3% D. 4%
Answer & Explanation

Answer: Option B

Explanation:

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6. Contribution of industrial sector in Pakistan's GDP is:


A. 18% B. 28%
C. 38% D. 48%
Answer & Explanation

Answer: Option A

Explanation:

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7. According to Pakistan Economic Survey, per capita income of Pakistan in U.S. dollars
is:
A. 400 B. 800

C. 1600 D. 2000
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8. Which one is per capita income:


A. Per worker income B. Per person income

C. Per family income D. Per industrial unit income


Answer & Explanation

Answer: Option B

Explanation:

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9. Base year of Pakistan for national accounting is:


A. 1979-1980 B. 1989-1990

C. 1999-2000 D. 2009-2010
Answer & Explanation

Answer: Option C

Explanation:

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10. Average growth rate of Pakistan's national income in past five years have been:
A. 36% B. 26%

C. 16% D. 6%
Answer & Explanation

Answer: Option D

11. Which of the following is an example of primary production:


A. Production of a computer B. Farmer growing wheat

C. Housewife bakes a cake D. Opening of a new school


Answer & Explanation

Answer: Option B

Explanation:

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12. Which is most likely to cause a more even distribution of income:


A. An increase in indirect taxes B. An increase in managers' salaries

An increase in progressive An increase in the rate of


C. D.
taxation inflation
Answer & Explanation

Answer: Option C

Explanation:

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13. If a country's growth rate was 5%, it means there would be 5% increase in:
A. Industrial output B. Retail price index

C. Government revenue D. Goods and service Produced


Answer & Explanation

Answer: Option D

Explanation:

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14. Pakistan's per capita income is less than:


A. Japan B. Korea

C. India D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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15. Working population is percent of total population of Pakistan:


A. 20% B. 30%

C. 40% D. 50%
Answer & Explanation

Answer: Option B

Explanation:

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16. Literacy rate in Pakistan is:


A. 37% B. 47%

C. 57% D. 67%
Answer & Explanation

Answer: Option C
Explanation:

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17. It increases rate of capital formation:


A. Less saving B. New technology

C. Rapid population growth D. High interest rate


Answer & Explanation

Answer: Option B

Explanation:

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18. It creates difficulties in measurement of national income of Pakistan:


A. Low literacy rate B. Parliamentary form of govt.

C. Huge imports D. High taxes


Answer & Explanation

Answer: Option A

Explanation:

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19. This step will increase saving in Pakistan:


A. Increase in taxes B. Decrease in taxes

C. Increase in population D. Increase imports


Answer & Explanation

Answer: Option B

Explanation:

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20. This step will increase investment in Pakistan:
A. Increase in taxes B. Increase in saving

C. Increase in population D. Increase imports


Answer & Explanation

Answer: Option B
21. This step will increase investment in Pakistan:
A. Increase in taxes B. Increase population

C. Increase interest rate D. Decrease interest rate


Answer & Explanation

Answer: Option D

Explanation:

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22. This step will increase per capita income in Pakistan:


A. Increase in taxes B. Increase in imports

C. Increase in investment D. Increase in population


Answer & Explanation

Answer: Option C

Explanation:

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23. Pakistan's:
A. GDP is greater than GNP B. GDP is smaller than GNP

There is no comparison of GDP


C. GDP is equal to GNP D.
and GNP
Answer & Explanation
Answer: Option B

Explanation:

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24. It creates difficulties in measurement of national income of Pakistan:


Imperfect markets, large Large rural area, poor transport
A. B.
population system

Underground economy,
C. Illiteracy, underground economy D.
deficiency of natural resources
Answer & Explanation

Answer: Option C

Explanation:

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25. The largest share in Pakistan's GNP is that of:


A. Services B. Industry

C. Agriculture D. Banking
Answer & Explanation

Answer: Option C

Explanation:

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26. Commodity sector contributes to national income of Pakistan:


A. 48% B. 58%

C. 68% D. 78%
Answer & Explanation

Answer: Option A
1. The necessary condition for equilibrium position of a firm is:
A. MC > MR B. MC > Price

C. MC = MR D. MC is falling

E. MC = AC
Answer & Explanation

Answer: Option E

Explanation:

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2. Profit is maximum when:


Distance between TR and TC is Distance between AR and AC is
A. B.
maximum maximum

Distance between MR and MC is


C. D. None of these
maximum
Answer & Explanation

Answer: Option A

Explanation:

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3. Profit is maximum when:


A. Slope of MC and MR is the same B. Slope of TC and TR is the same

C. Slope of AC and AR is the same D. None of these


Answer & Explanation

Answer: Option B

Explanation:

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4. Profit is maximum when:
A. TC and TR curves are parallel B. MC and MR curves are parallel

C. AC and AR curves are parallel D. None of these


Answer & Explanation

Answer: Option A

Explanation:

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5. At the point of equilibrium of firm (under perfect competition):


A. MC curve must be rising B. MC curve must be falling

C. MR curve must be rising D. None of these


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6. Normal profit is:


A. Part of total cost B. Part of economic profit

C. Total revenue minus total cost D. Total revenue minus implicit cost
Answer & Explanation

Answer: Option A

Explanation:

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7. Economic profit is:


A. Part of total cost B. Total revenue minus total cost

Total variable cost minus total


C. Total revenue minus explicit cost D.
fixed cost
Answer & Explanation
Answer: Option B

Explanation:

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8. A firm earns economic profit when total profit exceeds:


A. Normal profit B. Implicit costs

C. Explicit costs D. Variable costs


Answer & Explanation

Answer: Option A

Explanation:

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9. The basic goal of a firm is to:


Maximize welfare of its
A. Maximize revenues B.
employees

C. Maximize profit D. Maximize output


Answer & Explanation

Answer: Option C

Explanation:

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10. A firm's MR exceeds its MC, maximum profit rule requires that firm to:
Increase in perfect competition
Increase in output in both perfect
A. B. but not necessarily in imperfect
and imperfect competition
competition

Increase in output in imperfect


Decrease in output in both perfect
C. but not necessarily in perfect D.
and imperfect competition
competition
Answer & Explanation

Answer: Option A
1. Which of the following is an economic activity?
Medical facilities rendered by a Teaching one's own child at
A. B.
charitable dispensary home

A housewife doing household


C. D. Listening to music on the radio
duties
Answer & Explanation

Answer: Option A

Explanation:

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2. Which of the following is closest to the concept of economic production?


Sale of goods and services for
A. B. Manufacture of goods
profit

Addition to the value of Addition to the stock of goods


C. D.
commodities and services for future use
Answer & Explanation

Answer: Option C

Explanation:

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3. Which of the following is a characteristic feature of a modern economy?


A. Predominance of agriculture B. Self-sufficient village economy

Diversity in production of
C. D. Static technology
commodities
Answer & Explanation

Answer: Option C
Explanation:

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4. Identify economic stock from among the following:


Production of food grains during
A. Depreciation of machinery B.
the Kharif season

Purchase of food grains by a


C. D. Bank deposit of a household
household
Answer & Explanation

Answer: Option D

Explanation:

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5. Which of the following is an economic flow?


A. National capital B. Demand for machinery

Current account of a household in


C. D. Population of a country
a bank
Answer & Explanation

Answer: Option B

Explanation:

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6. A closed economy is one which:


Does not trade with other Does not possess any means of
A. B.
countries international transport

Is not a member of the United


C. Does not have a coastal line D.
Nations Organisation
Answer & Explanation
Answer: Option A

Explanation:

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7. The traditional economy is characterised by:


Division of labour and Organisation of production for
A. B.
specialisation self-consumption

Capital-intensive process of
C. D. Increasing state intervention
production
Answer & Explanation

Answer: Option B

Explanation:

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8. Who among the following is a non-resident of India?


A person of Indian origin A person of Indian origin
A. working at the World Bank, B. employed in the UNO office at
Washington, DC New Delhi

The Indian manager of the


C. Punjab National Bank branch D. An Indian tourist in Europe
office in London
Answer & Explanation

Answer: Option A

Explanation:

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9. Purchase of a ceiling fan by a household is treted in national income accounting as a


part of:
A. Capital formation B. Consumption over a long period
of time

Consumption at the time of its


C. D. Intermediate consumption
purchase
Answer & Explanation

Answer: Option C

Explanation:

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10. Corporate enterprises refer to:


Business houses maintaining a Business houses that obtain loans
A. B.
separate profit and loss account from a bank

Business houses that obtain loans Business houses that are


C. D.
from the public independent of their owners
Answer & Explanation

Answer: Option D
11. Which of the following is not a corporate enterprise?
A. Food Corporation of India B. Municipal Corporation of Delhi

Life Insurance Corporation of


C. Tata Iron and Steel Company D.
India
Answer & Explanation

Answer: Option B

Explanation:

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12. Departmental enterprises are a part of the:


A. General government B. Corporate sector

Non-profit institutions serving


C. Non-profit public institutions D.
households
Answer & Explanation

Answer: Option A

Explanation:

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13. Which of the following is a departmental enterprise of the Government of India?


A. Reserve Bank of India B. Indian Oil Corporation

C. Indian Railways D. Food Corporation of India


Answer & Explanation

Answer: Option C

Explanation:

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14. In which of the following sectors does production for self-consumption generally take
place?
Government administrative
A. B. Private corporate sector
enterprises

Non-departmental public
C. D. House-holds
enterprises
Answer & Explanation

Answer: Option D

Explanation:

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15. Subsistence production refers to:


Production for self-consumption
A. B. Production of necessities of life
only

C. Exports equaling imports D. Low levels of production


Answer & Explanation

Answer: Option A

Explanation:

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16. Collective wants include:


Sum total of all goods and Goods like refrigerators shared
A. B.
services wanted by individuals by members of a family

C. Newspapers D. Defence of a country


Answer & Explanation

Answer: Option D

Explanation:

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17. Which of the following are durable use producer-goods?


A. Fertilisers B. Tractors

C. Diesel oil D. Fodder for cattle


Answer & Explanation

Answer: Option B

Explanation:

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18. Demand for intermediate consumption arises in:


A. Consumer households B. Government enterprises only

All producing sectors of the


C. Corporate enterprises only D.
economy
Answer & Explanation
Answer: Option D

Explanation:

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19. Expenditure on the purchase of new replacement parts of machinery installed by a firm
is part of:
A. Fixed capital formation B. Consumption of capital

C. Intermediate consumption D. Final consumption


Answer & Explanation

Answer: Option C

Explanation:

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20. Which of the following is an expenditure on intermediate consumption?


Purchase of coal by a steel Purchase of coal by a dealer in
A. B.
factory coal

C. Purchase of coal by a household D. All of the above


Answer & Explanation

Answer: Option A
21. Demand for final consumption arises in:
A. Household sector only B. Government sector only

C. Both (a) & (b) D. All sectors


Answer & Explanation

Answer: Option C

Explanation:

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22. Which of the following activities of a farmer is an example of intermediate
consumption?
Payment of interest to a co-
A. Purchase of tractor B.
operative bank

Electricity charges for operating Wages paid to workers at


C. D.
a pump harvesting time
Answer & Explanation

Answer: Option C

Explanation:

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23. Imputed rental value of owner occupied dwellings is a part of:


A. Intermediate consumption B. Capital formation

C. Final consumption D. Expenditure on consumer durably


Answer & Explanation

Answer: Option C

Explanation:

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24. Sale of old newspapers by a household is a part of:


Net final consumption Value added by the household
A. B.
expenditure of the household sector

C. Capital formation D. Transfer payments


Answer & Explanation

Answer: Option A

Explanation:

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25. Which of the following constitutes a part of domestic fixed capital formation?
Net purchase of second-hand Net purchase of second-hand
A. B.
assets by corporate enterprises physical assets from abroad

Expenditure on new parts of Accumulation of stocks of


C. D.
physical assets fertilisers
Answer & Explanation

Answer: Option B

Explanation:

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26. Purchases made by the US Embassy in India are part of:


A. Net factor earnings from abroad B. Transfer payments

Domestic consumption
C. D. Exports from India to the USA
expenditure
Answer & Explanation

Answer: Option D

Explanation:

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27. Direct purchases abroad made by the government on current account are a part of:
A. Final consumption B. Investments

Current transfers from the rest of


C. Net factor payments abroad D.
the world
Answer & Explanation

Answer: Option A

Explanation:

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28. Which of the following is not a part of net investment in an economy?
Purchase of a wall-clock by a
A. Purchase of old shares B.
factory

Purchase of wall-clock by a Increasing the storage of raw


C. D.
household materials
Answer & Explanation

Answer: Option A

Explanation:

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29. Which of the following is included in the consumption of fixed capital?


Fall in the price of machinery and Expenditure on repairs and
A. B.
other stocks maintenance

Destruction of buildings in an Normal wear and tear machinery


C. D.
earthquake while in use
Answer & Explanation

Answer: Option D

Explanation:

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30. Gross domestic fixed-capital formation does not include:


Net purchase of second hand
Net imports of second-hand
A. machinery by private corporate B.
machinery from abroad
sector from Government

Own account production of news Construction of new roads and


C. D.
assets bridges
Answer & Explanation

Answer: Option A
31. Value of output differs from the value added by the amount of:
A. Indirect taxes B. Wages and Salaries

C. Intermediate consumption D. Gifts received from abroad


Answer & Explanation

Answer: Option C

Explanation:

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32. The gross fixed investment in an economy during a year is Rs. 200 Crore. The economy
possessed Rs 1200 Crore worth of fixed capital at the beginning of the year and the rate
of depreciation is 10% per annum. What is the net value of fixed capital stock held at
the end of the year?
A. Rs 1600 crore B. Rs 920 crore

C. Rs 1280 crore D. Rs 1200 crore


Answer & Explanation

Answer: Option C

Explanation:

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33. In consumption of capital is equal to gross fixed investment, then:


A. Net investment is zero B. Net investment is negative

C. Net investment is positive D. National income is constant


Answer & Explanation

Answer: Option A

Explanation:

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34. Which of the following constitutes an investment by a household?


A. Purchasing a washing machine B. Painting a house

C. Purchasing a new house D. Purchasing a new car


Answer & Explanation

Answer: Option C

Explanation:

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35. Net value added is equal to:


Payments accruing to factors of
A. B. Compensation of employees
production

Value of output minus


C. Wages plus rent plus interest D.
depreciation
Answer & Explanation

Answer: Option A

Explanation:

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36. Addition to the stocks of food grains by the Food Corporation of India is a part of:
Net revenue of the Government
A. Net fixed investment B.
sector

C. Gross capital formation D. Final consumption


Answer & Explanation

Answer: Option C

Explanation:

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37. Mixed income of the self-employed means:


Gross profits received by a Rent interest and profit of an
A. B.
proprietorship enterprise

Combined factor payments which


C. D. Wages due to family workers
are not distinguishable
Answer & Explanation

Answer: Option C

Explanation:

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38. Operating surplus implies:


Net income from property and
A. Gross value added minus profits B.
entrepreneurship

Part of profits which are


C. Net profits of public enterprises D.
reinvested
Answer & Explanation

Answer: Option B

Explanation:

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39. Operating surplus arises in:


A. Government sector only B. Household sector only

All producing enterprises in the


C. Public enterprises only D.
corporate sector
Answer & Explanation

Answer: Option D

Explanation:

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40. Operating surplus differs from net value added by the amount of:
A. Compensation of employees B. Net indirect taxes

C. Consumption of fixed capital D. Dividends


Answer & Explanation

Answer: Option A
41. Which of the following is not a part of the compensation of employees?
Employer's contribution to
A. B. Leave travel allowance
provident fund

Payments made to visiting


C. D. Pensions to retired employees
foreign consultant
Answer & Explanation

Answer: Option C

Explanation:

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42. Identify the item, which is not a factor payment:


Free uniforms to defence Salaries and allowance to the
A. B.
personnel members of Parliament

Imputed rent of an owner- Scholarships given to scheduled


C. D.
occupied building caste students
Answer & Explanation

Answer: Option D

Explanation:

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43. Which of the following is an example of factor-income from abroad?


Interest earned by a non-resident
Export of handicrafts from India
A. Indian on his bank account in B.
to the UK
India
Money sent by an engineer
Profits earned by a branch of the
C. employed in London to his D.
State Bank of India in London
family in Delhi
Answer & Explanation

Answer: Option D

Explanation:

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44. Transfer payments refer to payments which are made:


Without any exchange of goods To workers on transfer from one
A. B.
and services job to another

C. As compensation of employees D. None of the above


Answer & Explanation

Answer: Option A

Explanation:

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45. Personal disposable income is:


Always more than personal
A. Always equal to personal income B.
income

Equal to personal income minus Equal to personal income minus


C. D.
direct taxes paid by household indirect taxes
Answer & Explanation

Answer: Option C

Explanation:

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46. If during a year the national income at constant prices goes up by 5%, while prices also
rise by 5% and population registers a growth of 2%; then the real per capita income
will:
A. Remain constant B. Rise by 2%

C. Decrease by 3% D. Increase by 3%
Answer & Explanation

Answer: Option D

Explanation:

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47. National income estimates of India are published both at current and constant prices.
What is the base year for constant price estimates published at present?
A. 1960-61 B. 1970-71

C. 1980-81 D. 1985-86
Answer & Explanation

Answer: Option C

Explanation:

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48. The national income accojnts, direct personal taxes are recorded as:
Receipts of the government Receipts of the government
A. sector and payments of the B. sector and payments of the
corporate sector household sector

Transfer from the household Disbursements of the government


C. D.
sector to the government sector sector
Answer & Explanation

Answer: Option B

Explanation:

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49. For which of the following sectors is the income method used for estimation of national
income of Pakistan?
A. Agriculture and allied activities B. Pushing

C. Forestry D. Banking and insurance


Answer & Explanation

Answer: Option D

Explanation:

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50. Identify the sector in respect of which the expenditure method is used for estimating
national income in India:
A. Registered manufacturing B. Construction

Public administration and Real estate, ownership of


C. D.
defence dwellings and business services
Answer & Explanation

Answer: Option B
51. If GNP at market prices is Rs 1200 crore, and fixed capital stock is worth Rs 2000 crore
which depreciates at the rate of 10% per annum and the net indirect taxes amount is Rs
150 crore. What is the national income?
A. Rs 3050 crore B. Rs 2850 crore

C. Rs 1000 crore D. Rs 850 crore


Answer & Explanation

Answer: Option D

Explanation:

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52. National income differs from the net national product at market prices by the amount
of:
A. Current transfers from rest of the B. Net indirect taxes
world

C. National debt interest D. It does not differ


Answer & Explanation

Answer: Option D

Explanation:

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53. If net factor income from abroad is zero, then:


A. Domestic product is zero B. National product is zero

National product is equal to


C. D. National product is constant
domestic product
Answer & Explanation

Answer: Option D

Explanation:

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54. For the estimation of private income which of the following items has to be added to
national income?
Income from property accruing to Savings of the non-departmental
A. B.
government enterprises

C. Subsidies D. Interest on national debt


Answer & Explanation

Answer: Option D

Explanation:

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55. While estimating personal income from national income, which of the following items
need to be deducted?
A. Net indirect taxes B. Direct Taxes paid by households

C. Dividends D. Corporate profitstax


Answer & Explanation

Answer: Option B

Explanation:

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56. Which of the following has to be added to national income to obtain the net national
disposable income?
Income from property and
Net current transfers from the rest
A. entrepreneurship accruing to B.
of the world
Government

C. Profits of public enterprises D. Loans from public


Answer & Explanation

Answer: Option D

Explanation:

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57. Net national product at factor cost is :


A. Equal to national income B. More than national income

Always more than the gross


C. Less than national income D.
national product
Answer & Explanation

Answer: Option A

Explanation:

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58. Which of the following is deducted while estimating national income by the value-
added method?
Value of goods and services Imputed rental value of owner-
A. B.
produced for self-consumption occupied building

C. Net factor income from abroad D. Consumption of capital


Answer & Explanation

Answer: Option D

Explanation:

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59. While estimating national income by the income method one of the following is not
included. Identify it:
Mixed income of the self
A. B. Inheritance tax or death duty
employed

Interest on bonds of a foreign Income of employees of


C. D.
company voluntary organisations
Answer & Explanation

Answer: Option B

Explanation:

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60. Which of the following is not included while estimating national income by the
expenditure methods?
Investment in shares of a new
A. B. Defence expenditure
company

C. Net indirect tax D. Net exports


Answer & Explanation

Answer: Option C
61. The difference between net national product at market prices and net domestic product
at market prices is equal to:
A. Value of exports B. Net current transfers from abroad

Value of exports minus value of


C. D. Net factor income from abroad
imports
Answer & Explanation

Answer: Option D

Explanation:

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62. Which of the following accounts for the difference between net domestic product at
market prices and national income?
A. Net factor income from abroad B. National debt interest

Net factor income from abroad Net factor income from abroad
C. D.
minus current transfers minus indirect taxes
Answer & Explanation

Answer: Option D

Explanation:

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63. Which of the following has to be deducted from the value of output to arrive at the net
value added by a producing enterprise?
Value of intermediate
A. B. Consumption of fixed capital
consumption

C. Net indirect taxes D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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64. The value added method of measuring national income is also known as:
A. Net output method B. Production method

C. Industry of origin method D. All of the above


Answer & Explanation

Answer: Option D

Explanation:

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65. Net borrowings from abroad are a part of:


A. Gross domestic product B. Net national product

C. Gross investment D. Capital transfers


Answer & Explanation

Answer: Option C

Explanation:

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66. Aggregate gross receipts means:


A. Turnover value of output B. Receipts of the Government

Receipts from the rest of the


C. Receipts of the corporate sector D.
world
Answer & Explanation

Answer: Option A

Explanation:

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67. The term national income commonly refers to:


A. GNP at factor cost B. GNP at market prices
C. NNP at factor cost D. NNP at market prices
Answer & Explanation

Answer: Option C

Explanation:

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68. Which of the following is an example of transfer payment by the Government?


Free housing accommodation to Free housing accommodation to
A. B.
the government employees the President of India

C. National debt interest D. Bonus paid to railway employees


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69. Transfer receipts of the Government include:


Sale of second hand cars by
A. B. Direct and indirect taxes
government departments

Imputed rent of government Dividends received from public


C. D.
buildings enterprises
Answer & Explanation

Answer: Option B

Explanation:

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70. Which one is an example of capital transfer within a country?


Compensation to residents whose
A. houses have been damaged by B. Old age pensions
floods

Interest paid by consumer


C. D. Gifts to sick and poor on festivals
households on consumer loans
Answer & Explanation
Answer: Option A
71. Net retained earnings abroad means:
Income retained by a resident Profits of resident companies
A. B.
working abroad abroad

Net undistributed profits of


C. resident and non-resident D. Foreign exchange reserves
companies
Answer & Explanation

Answer: Option C

Explanation:

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72. Which of the following is not an example of capital transfers between countries?
A. War damages B. Gifts for cyclone victims

C. Economic aid D. Grants from other governments


Answer & Explanation

Answer: Option B

Explanation:

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73. Interest on public debt is a part of:


Transfer payments by the
A. B. Transfer payments by enterprises
government

C. Domestic income D. Interest payments by households


Answer & Explanation

Answer: Option A

Explanation:
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74. Which of the following is not a government transfer payment to households?


A. Scholarship B. Subsidy

C. Family pension D. Unemployment allowance


Answer & Explanation

Answer: Option B

Explanation:

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75. Income from property is a part of:


Mixed income of the self-
A. B. Operating surplus
employed

C. Compensation of employees D. None of these


Answer & Explanation

Answer: Option B

Explanation:

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76. Unilateral payments are known as:


A. Factor income B. Factor payments

Payments for productive services


C. Transfer payments D.
rendered by others
Answer & Explanation

Answer: Option C

Explanation:

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77. Identify the correct statement:
Personal disposable income
Capital transfers are paid from
A. excludes direct taxes paid by B.
current income
households

Lottery income received by a Royalties are a part of


C. D.
household is factor income compensation to employees
Answer & Explanation

Answer: Option A

Explanation:

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78. Which of the following includes interest on national debt?


A. National income B. Personal income

C. Gross national product D. Net national product


Answer & Explanation

Answer: Option B

Explanation:

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79. Which of the following is incorrect?


NNP at factor cost = NNP at
GDP at market prices = NNP at
A. B. market prices minus net indirect
factor cost plus net indirect taxes
H taxes

GNP at market prices = GDP at


C. market prices plus net factor D. None of the above
income from abroad
Answer & Explanation

Answer: Option D
Explanation:

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80. The first estimate of national income in India was made by Dadabhai Naoroji for the
year:
A. 1857-58 B. 1867-68

C. 1881-82 D. 1890-91
Answer & Explanation

Answer: Option B
1. Which of the following is one of the assumptions of perfect competition.
A. Few buyers and few sellers B. Many buyers and few sellers

C. Many buyers and many sellers D. All sellers and buyers are honest
Answer & Explanation

Answer: Option C

Explanation:

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2. A firm under perfect competition is:


A. Price maker B. Price breaker

C. Price taker D. Price shaker


Answer & Explanation

Answer: Option C

Explanation:

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3. Which of the following markets comes closet to perfect market.


A. Wheat market B. Cigarette market
C. Cold drinks market D. Stock market
Answer & Explanation

Answer: Option A

Explanation:

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4. This kind of market is undesirable:


A. General markets B. Specialized

C. Local market D. National market


Answer & Explanation

Answer: Option C

Explanation:

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5. Which is a condition for existence of monopoly:


A. Big size B. Identical product

C. Absence of government taxes D. No close substitute


Answer & Explanation

Answer: Option D

Explanation:

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6. In case of monopoly:
Marginal revenue curve always Total revenue curve always
A. B.
slopes upward slopes upward

Marginal revenue is always equal Marginal revenue is always less


C. D.
to average revenue than average revenue
Answer & Explanation

Answer: Option D

Explanation:

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7. In case of perfect competition in the market:


Marginal revenue curve always Marginal revenue curve always
A. B.
slopes upward slopes downward

Marginal revenue is always equal Marginal revenue is always less


C. D.
to average revenue than average revenue
Answer & Explanation

Answer: Option C

Explanation:

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8. In the business world:


A firm working under perfect A firm working under monopoly
A. competition wants to become a B. wants to become a competitive
monopoly firm

Monopoly price is always higher Competitive price is always


C. D.
than competitive price higher than monopoly price
Answer & Explanation

Answer: Option A

Explanation:

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9. Which is not true:


Perfect monopoly does not exist Perfect competition does not
A. B.
in real world exist in real world
Every firm wants to reduce
C. Every monopoly is evil D.
competition
Answer & Explanation

Answer: Option C

Explanation:

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10. The major difference between perfect competition and monopolistic competition is:
A. Number of firms B. Differentiated product

C. Rate of profit D. Free exist and entry


Answer & Explanation

Answer: Option B
11. Marginal revenue is always less than price at all levels of output in:
A. Perfect competition B. Monopoly

C. Both (a) & (b) D. None of the above


Answer & Explanation

Answer: Option B

Explanation:

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12. Which of the following is not a characteristic of perfect competition?


the demand curve of firm is
A. Free entry and exit of the firms B.
horizontal

The marginal revenue curve is An individual firm can influence


C. D.
horizontal the price
Answer & Explanation

Answer: Option D
Explanation:

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13. When marginal revenue is zero, total revenue:


A. Maximum B. Minimum

C. Zero D. Decreasing
Answer & Explanation

Answer: Option A

Explanation:

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14. Marginal revenue is always less than price at all levels of output in:
A. Perfect competition B. Monopoly

C. Both (a) & (b) D. None of the above


Answer & Explanation

Answer: Option B

Explanation:

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15. Which of the following is not a characteristic of perfect competition?


Demand curve of a firm is
A. Free entry and exit of the firms B.
horizontal

The marginal revenue curve is An individual firm can influence


C. D.
horizontal the price
Answer & Explanation

Answer: Option D