If the values of nominal Gross Domestic Product (GDP) and GDP deflator in 2019 are Rs. 700,000 and 1.75 respectively, the real GDP in this year is:

• A) Rs. 600,000
• B) Rs. 500,000
• C) Rs. 400,000
• D) Rs. 300,000

Suppose the consumption function is C = 450 + 0.5 Yd. What is marginal propensity to consume?

• A) 0.5
• B) 50
• C) 5
• D) 1.5

A rise in government expenditure leads to a multiple rise in national income due to:

• A) Multiplier effect.
• B) Inelastic demand.
• C) Accelerator.
• D) Inelastic supply.

In case of adaptive expectations the time period is

• A) t+1
• B) t-1
• C) t-1/t+1
• D) t/1

------------- is an accounting record of a country’s transactions with rest of the world.

• A) Rate of inflation
• B) Balance of trade
• C) Trade liberalization
• D) Balance of payment

Which of the following events shifts the short-run aggregate supply curve to the right?

• A) An increase in price expectations
• B) A drop in oil prices
• C) An increase in government spending on military equipment
• D) A decrease in the money supply

Suppose the consumption function is C = 200 + 0.6 Yd. If the value of disposable income is Rs. 10000 then total consumption equals:

• A) Rs. 5800.
• B) Rs. 6000.
• C) Rs. 6200.
• D) Rs. 6400.

change in expenditure is less but change in income is higher due to

• A) Accelerator
• B) Multiplier effect
• C) Inelastic demand
• D) Paradox of thrift

If marginal propensity to consume (MPC) increases, then the value of multiplier will:

• A) Decrease.
• B) Increase.
• C) Become zero.
• D) Remain unchanged.

The average propensity to save is the ratio of:

• A) Total saving to a change in disposable income.
• B) A change in saving to a change in disposable income.
• C) A change in saving to total disposable income at a specific income level.
• D) Total saving to total disposable income at a specific income level.

Imposition of an output tax on all firms in a competitive industry will result in:

• A) A leftward shift in the market supply curve.
• B) The entry of new firms into the industry.
• C) A downward shift in each firm's marginal cost curve.
• D) A downward shift in each firm's average cost curve.

The supply curve for a competitive firm is:

• A) Its MC curve above the minimum point of the AVC curve.
• B) Its entire MC curve.
• C) The upward-sloping portion of its MC curve.
• D) Its MC curve above the minimum point of the ATC curve.

Price ceilings:

• A) May decrease consumer surplus if demand is sufficiently inelastic.
• B) Always increase consumer surplus.
• C) May decrease consumer surplus if demand is sufficiently elastic.
• D) Always decrease consumer surplus.

The additional revenue from producing one more unit of output is called:

• A) Slope of average revenue
• B) Total revenue
• C) Marginal revenue
• D) Average revenue

A firm maximizes profit by operating at the level of output where:

• A) Average revenue equals average variable cost.
• B) Total cost equals marginal cost.
• C) Average revenue equals average cost.
• D) Marginal revenue equals marginal cost.

Suppose Fauji Fertilizer Company Limited spends Rs. 10000 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis) to produce 10 bags of Urea. If the wage rate is Rs. 100 per hour and the rental cost of capital is Rs. 200 per hour, then slope of the Isocost line will be:

• A) -1/200
• B) -200
• C) -2
• D) - 1/2

Revenue is equal to:

• A) Price times quantity minus marginal cost.
• B) Price times quantity minus total cost.
• C) Price times quantity minus average cost.
• D) Price times quantity.

Assume that a firm spends Rs. 1000 on two inputs, labor (L) graphed on the horizontal axis and capital (K) graphed on the vertical axis. When the wage rate is Rs. 100 per hour and the rental cost of capital is Rs. 200 per hour, the equation of the Isocost line is:

• A) 1000 = 200(L+K)
• B) 1000 = 100L + 200K
• C) 1000 = 200L + 100K
• D) 1000 = 10(100L+200K)

Which of the following is included in economic depreciation to make it equal to the user cost of capital?

• A) Interest Rate - Value of Capital
• B) Interest Rate + Value of Capital
• C) Interest Rate / Value of Capital
• D) Interest Rate * Value of Capital

In a constant-cost industry, price always equals:

• A) LRAC and minimum LRMC.
• B) LRMC and minimum LRAC.
• C) Minimum LRAC, but not LRMC.
• D) LRMC and LRAC, but not necessarily minimum LRAC.