What measures the rate of increase of average wage in the economy?

• A) Wage inflation
• B) Producer Inflation Index
• C) Consumer Inflation Index
• D) Wage deflation

A reason why some economists basically ignore the short run is because they believe that the economy:

• A) Can only be graphed with a horizontal curve.
• B) Can only be graphed with a vertical curve.
• C) Has self-correcting mechanisms.
• D) Never needs correction.

Keeping in view the model of aggregate supply and aggregate demand, in the long run, a decrease in the money supply should cause:

• A) Prices to fall and output to remain unchanged.
• B) Prices to rise and output to remain unchanged.
• C) Both prices and output to fall.
• D) Both prices and output to rise.

According to classicals, unemployment is

• A) Seasonal
• B) Voluntary
• C) Structural
• D) Involuntary

Contentious movement of production, income and resources between producers and consumers is known as:

• A) Inflation
• B) Circular flow
• C) Investment
• D) Consumption

The price level in long run is determined by:

• A) Money supply.
• B) The government.
• C) Aggregate demand.
• D) Aggregate supply.

An exchange rate that varies according to the supply and demand for the currency in the foreign exchange market is called a(n) _________ exchange rate.

• A) Undervalued
• B) Flexible
• C) Fixed
• D) Overvalued

Counting a product more than once in National income measurement is known as:

• A) Mathematical bias.
• B) Statistical error.
• C) Counting error.
• D) Double counting.

In the Keynesian cross model, the 45-degree line has a slope of:

• A) Infinity.
• B) 45.
• C) 0.
• D) 1.

Agents erroneously spend more than they should, because:

• A) Government driven actual inflation in period t as expected in period t-1
• B) Government is not driven actual inflation in period t as expected in period t-1
• C) Government driven actual inflation in period t-1 as expected in period t
• D) None of the given options is true

The traditional Phillips Curve shows the inverse relationship between the:

• A) Short run and the long run.
• B) Nominal wage and the real wage.
• C) Unemployment and output.
• D) Rate of inflation and the unemployment rate.

Which of the following is the formula to calculate unemployment rate?

• A) None of the given options.
• B) Number of unemployed persons + labour force.
• C) Number of employed persons / labour force x 100.
• D) (Number of unemployed persons / labour force) x 100.

Which of the following is NOT an example of leakage into the circular flow of income?

• A) imports
• B) Exports
• C) Taxes
• D) Saving

Which of the following is a flow variable?

• A) Gross Domestic Product.
• B) The balance in your savings account.
• C) Government debt.
• D) The value of the house in which you live.

Which of the following will cause a rightward shift in Philips curve?

• A) A decrease in the expected inflation rate
• B) A favorable supply shock
• C) An increase in the expected inflation rate
• D) A decrease in the natural rate of unemployment

If the values of real Gross Domestic Product (GDP) and GDP deflator in 2007 are Rs. 520,000 and 1.25 respectively, the nominal GDP in this year is:

• A) Rs. 416, 000.
• B) Rs. 580, 000.
• C) Rs. 450, 000.
• D) Rs. 650, 000.

The process of converting nominal GDP into real GDP is known as:

• A) Inflation
• B) Deflation
• C) Appreciation
• D) Depreciation

Which of the following equations represent the quantity theory of money?

• A) M=PQ
• B) MV = PQ
• C) MV=Q
• D) M/V = P/Q

If there is an excess demand for loanable funds in the financial markets then:

• A) Output will be stagnant.
• B) Real interest rate will decrease.
• C) Real interest rate will increase.
• D) Interest rate will be same.

If the US dollar is strengthening against Pakistani rupee, this means:

• A) The dollar is depreciated against rupee.
• B) The US trade balance with the Pakistan economy has improved.
• C) The dollar can now purchase more rupees.
• D) The rupee can now purchase more dollars.