• A necessary condition for a mixed economy is that there are-Public & private sector

• A good has a price elasticity of supply of 0.8 which of the following best describes the effect of rise in demand for this good?-
1,2,3&4
• A train company acknowledges that externalities may reduce the welfare of its customers when it provides- Smoking and non-
smoking carriages
• As the process of globalization increases, typical business will- Be more & more affected by changes in exchange rates
• All of the following are characteristics of a recession except which one?-Increased inflationary pressure
• All of the following are typical characteristics of oligopoly except one?-The ability to conduct independent decision making
• All of the following would lead to fall in the circular flow of national income except which one- A rise in the average propensity to
consume
• All of the following are features of an economic union except which one-A fixed exchange rate relative to non union currencies
• As a result of a period of rapid economic growth an economy is likely to experience all of the following except which one- an
improving overseas trade balance
• A rise in interest rates in an economy would lead to all of the following except which one?-An increase in business investments
• An economy is usually described as a mixed economy if production is?-Determined partly by the market mechanism and partly by the
state
• A consumption function has a constant average propensity to consume (APC) of 0.7.Which of the following statement is false-
the economy will be in micro economic equilibrium
• An inferior good can be distinguished from a normal good because an inferior good has- Negative income elasticity of demand
• All of the following statements about small firms are correct except one-incorrect- Small firms are common in industries which display
increasing result to scale
• A Surplus on the current account of the balance of payment can be financed by- Lending abroad on the capital account
• A countries currency depreciate (fall) on the foreign exchange market.-except one- Business could keep the foreign exchange price of
their export constant and expand their profit margin
• A country will have a comparative advantage in manufacturing goods if- It can produce manufactured good at a lower opportunity cost
than other countries
• A firm may suffer from X-inefficiency because of organization slack.-except one- The number of rival firm increases
• All of the following are sources of finance for business except which one?-Certificate of deposit
• A production possibility curve can be used to show all of the following except?-The difference combinations of two goods that a
household can purchase with available income
• All of the following item would appear as a credit on the current account of country’s balance of payments accounts except
which one?-Outflow of capital
• Assume the demand for cheese is price elastic…………………..effect of a rise in demand for cheese?-High price, more sold, rise in
revenue of cheese makers
• All of the following would result from a shift from direct to indirect tax except which one?-A more progressive taxation system
• All of the following will tend to increase the number of firms in any one industry except which one?-High transport cost
• A rise in the gross national product of a country will raise average living standards only if-I exceeds the rate of growth of population
• All of the following are appropriate policies to deal with the problem of industries which cause pollution except which one?-
Subsidies to the producers
• According to purchasing power parity theory, if a country’s inflation rate is 5% higher than the inflation………-The country’s
exchange rate will fall 5% to restore the term of trade
• All of the following are examples of externalities except which one?-Some consumers being able to afford goods because price have
been driven up the demand from other consumers
• A country has a trade deficit. The demand for its imports and exports are both price elastic…………………..except one?- An
improvement in the country’s term of trade
• An advantage of command economy is that:-Social cost and benefits can be taken into account
• An example of forward vertical integration is-A car manufacturer taking over an engine factory
• A profit-maximizing firm in imperfect competition must cut the products price is-Marginal revenue is greater than marginal cost
• A country is an oil exporter and the price for its oil is inelastic. Which of the following is correct about a substantial increase in
oil price?- Improves the countries balance of payments in the current account
• A supply and demand diagram, other things remaining the same, an increase in production costs will normally shift-The supply
curve to the left
• All of the following statements relate to increase in government spending which is not accompanied by an increase. Which
statement is not correct?-An expansionary monetary policy is being pursued
• A private enterprise system of economic organization can be criticized on the ground that-State own industries………………(X)-1,3&4
• A cut in interest rates will result in?-Faster economic growth
• A currency is being depreciated which of the following would occur?-There will be an increased competitiveness of export
• An International mobility of factors will create all of the following except which one?-Decrease in international specialization of
production
• All of the following may be true about floating exchange rate systems except which one?-The balance of payment will adjust without
impacting the local economy
• Competition in oligopolistic market is characterized by all of the following except one-Price instability
• Central banks fulfill all of the following functions except which?-Chief advisor to government on taxation policy
• Central government funding operations will-Convert short-term debt to long-term debt
• Country Y and country Z both impose tariffs on goods imported from each other………………..-Real income would grow at a slower rate
in both countries compared to a situation…
• Cross-elasticity of demand for goods which are complementary is-Negative
• During recession many governments borrow to give them funds to increase government expenditure on job
scheme…………………………boom phase- Open market operations
• Economic Rent is- Income above the level required to induce a given quality of a factor to be supplied
• Economies of scale can result from all the following except one-A factory employing two shifts of workers rather than one shift per day
• Every year a household allows its bank account to become overdrawn for 3 months to pay for its annual holiday…-A short term of
synchronization between payment and receipt
• For a good to be considered scare in the economic sense, it is only necessary for it to- Command price
• For a business, diseconomies of scale occur when?-Difficulties in managing a large firm to rising long run average costs
• Faced with falling prices and profits, affirm decided to leave one industry and move………………..-correct- there can be no barriers
to entry and exit separating two industires
• Financial intermediation is the process by which-Net savers and net borrowers are brought together
• Government provides public goods, such as street light, because- It would be an unprofitable activity for private business because of the
free-rider problem
• Goods A and B are complementary goods because the cross elasticity of demand for A with respect to B is- (-0.5)
• Government should encourage economic growth because it always lead to-Increased income generated within the economy
• If a country were to join a currency union, its businesses would experience all of the following except one- Reduce price
transparency
• If a firm wishes to maximize market share without incurring a loss, it should set its price where?-Average revenue equals average
cost
• If a firm reduces the price of its good from $10 to $8 and,…………………..- ( -0.5)
• If the demand curve for good A is negatively sloped, a fall in the price of a substitute good B result- A leftward shift in the demand
curve for good A
• If a country has an absolute advantage in the production of all goods then- Trade will take place and all the participating countries will
gain from it
• If a firm increases employment of all its factors by 50% and as a result output increases by 60% it has experienced- Increasing
return to scale
• Identify the source of funds most appropriate for a growing company to use which wishes to borrow funds long-term to………..- A
/ ordinary shares
• In fiscal policy, the term automatic stabilizer refers to any factor that-The causes aggregate demand to rise in recession and fall in
booms
• In a fully employed economy, which one of the following would lead to demand pull inflation?-A reduction in the rate of income tax
• In a market economy, price act as all of the following except which one?-Signal to consumer about cost
• Identify in the following list the statement that does not describe a function of a financial intermediary?-Transfer payment
• In a system freely floating exchange rates the central bank and government will?-Have less ability to control the money supply than in
fixed exchange rate
• If a government, on ground of economic efficiency, were levy tax on an industry because of the pollution……..-The difference
between private and social cost of production
• In a customs union member countries-Trade freely with each other and accept a common external tariff for trade with the rest of the world
• If a firm operating in an oligopolistic market believes that its demand curve is kinked-It will tend to avoid price charges
• It is necessary to include a balancing item in the BOP to-Compensate for mistake made when recording current and capital flow
• In a market economy, price act as all of the following except which one?-Signals to consumers about costs
• Identify which of the following features does not distinguish redeemable debt apart from equity:-It will never be traded on an
investment market
• In national income accounting the adjustment to add exports and deduct imports has which of the followings effects?-Convert
gross domestic expenditure to gross domestic income
• Inflation is undesirable for all of the following reasons except which one?-Inflation shift wealth from debtors to creditors in an arbitrary
fashion
• If a consumer find that their total………..-Negative
• In a situation of rapid economic growth which of the following can occur?-A deterioration in the balance of payments
• Monetarist economists believe all of the following except which one?-In the long run only fiscal policy is effective in reducing
unemployment
• Other things being equal and assuming that the UK is net oil exporter and that the demand fir UK……………………..- Improve the
UK’s balance of payment on current account
• On an aggregate demand and aggregate supply diagram, cost-push inflation is shown by- A leftward shift of the short-run aggregate
supply curve
• One of the result of scarcity is that- Economic choice involve opportunity costs
• Other things remaining equal, which of the following is likely to increase as a result of the sale by Bank of England of large
quantity of gilt-edged stock-The liquids reserves of banks
• Other things remaining equal which of the following would encourage a speculative capital inflow into the UK economy?-Foreign
firm setting up plants in the economy
• Production of goods public interest if?-Social benefits greater than social cost
• Regularly o ces have been established after the privatization of some nationalized industries because-Some industries retain
significant monopoly power
• Real rates of interest are positive and rising, then-Lender are gaining at the expenses of borrowers
• Real price index is a measure of?- The average cost of living
• Real GDP per capita is affected by which of the following factors?- 1,2,3 (multiple answers)
• Select best definition of a regressive tax from the option bellow?- A tax on expenditure
• Some not-for profit organizations (NPOs) are required to show they are effective-Achieves the goals and objectives set for it
• Select the definition of marginal cost from the list below-The addition to total cost when output rises by one unit
• The real rate of interest- The nominal rate of interest adjusted for inflation
• The production possibility frontier (curve) for a country will shift outwards (to right) if- investment increase the capital stock
• The Eurocurrency market is- The market for bank deposits denominated in a currency other than that of the country where the bank is
located
• The stock market fulfills all of the following functions except one?- the market for foreign exchange
• The burden of an indirect tax on a good will fall most heavily on the producer when?-the demand for the good is price elastic and the
supply is price inelastic
• The economist’s view that ‘there is no such thing as a free lunch’ related to the application of- The concept of opportunity cost
• The market demand for a good has a price elasticity of demand of 0.4.Which of the following statement is correct?-Total quality
sold will fall as price rises
• The existence of natural rate of unemployed means that-There is no trade-off between inflation and unemployment in the long-run
• The equilibrium level of national income in an economy is the level of income at which-Full employment occur
• The incentive for two countries to trade with each other would be reduced or removed by-Transport cost between……………./The
industries in both countries suffering…..-3&4
• The opportunity cost of society of building a fifth terminal at London Heathrow airport would be?-The other goods or services which
could be produced if the terminal hadn’t built
• The law of diminishing marginal return assume that?-The quantity of at least one factor of production remains fixed
• The £ has risen against other currencies since August, defying forecasters who thought that the UK’s widening trade
deficit……………………-UK interest rates must have increase
• The short-run shut down price for a firm in perfect competition occurs where price equals-Average variable cost
• The development of the Indian economy in recent years has led to it becoming well-known………………………………sort of economic
development?-Growth is the tertiary sector
• To maximize utility, a consumer should spend more of his or her income so that the-Marginal utility obtained from each good is
equalized
• The budget deficit of a government may increase to reduce?-Demand deficient unemployment
• The demand for a particular category of labour is shifting to left which of the following could be cause?-Decrease in the price of
substitute factor
• The following are same statements about building societies which of them are correct?-They are mutually owed organizations
• The money national income for a country in 2001 is equal to-Real national income in 2001 adjusted for inflation
• The distinguish feature of a transnational(multinational) company is that-It has production facilities in more than one country
• The market mechanism can achieve all of the following except which one?-Ensuring socially fair distribution of good and services
• Under which of the following circumstances, will an increase in the PSBR lead to an increase in the money supply, other things
being equal-The PSBR is financed by selling government debts to the banking system
• Which is the following is an example of fiscal policy- The creation of tax-exempt individual savings accounts (ISAs)
• Which of the following can be efficiently allocated between competing uses by the price mechanism- Private Good
• What is meant by the term ‘mezzanine finance’- Finance is neither pure nor equity
• Which theory of the firm is described by the following statement ‘the decisions of management are the result of political
maneuvering…………………’- Satisfying
• Which of the following make effective control of the money supply difficult- Financial(X) - 1, 2 & 4
• Whenever demand for goods price elastic, an increase in price will- Decrease total consumer expenditure on the good
• Which of the following function is not performed by investment exchange as NASDAQ, the London ………………..- A lender of last
resort to the banking system
• Which of the following are not classed as a non-bank financial intermediary?- Investment exchange
• Which of the following measures of national income would be most appropriate for assessing whether material standards of
living have improved over the past 50 years?-
The rise in the national income per capital
• Which one of the following is not a source of economic growth?- Investment on stocks and shares
• Which one of the following would be an example of price discrimination?- British Telecom charging less for telephone calls made after
6.00 pm
• Which of the following is most likely to lead to rise in the exchange rate of the country’s currency and fall in the price of stock
shares?- An increase in the rates of interest within the country
• When a tax is imposed upon a commodity which the producers must pay to the government, this will be cause the commodity’s-
Economic welfare always increase
• When the government intervenes in the market economy to correct a market failure- The problem of government failure may result
• Which of the following is a positive economic statement-the distribution of income and wealth is unequal
• Which of the following will be characteristic of the stake holders most able to influence the management of an organization-High
power, high interest
• Which of the following provides a definition of a free good-It is available at zero cost of production in unlimited qualities
• Which of the following statements about the difference between profit and Shareholder wealth is false?-Shareholder wealth
influence share prices but profit does not
• Which of the following is a characteristic of imperfect competition but not of not of perfect competition-Product differentiation
• When faced with a recession, the appropriate combination of policies for a government in order to generate a recovery is-
Monetary expansion, Increase in public expenditure and application of the exchange rates
• Which of the following is a normative economic statement-If the government cut old age pension poetry will increase
• Which of the following most likely to accompany a fall in the market prices of fixed-interest government bond?-An increase in
long-term interest rates
• Which of the following business would benefit most from an expansionary monetary policy?-Highly geared companies producing
consumer durable goods
• Which of the following statements about societies In the UK are correct?-Since they are not………..(X)- 1 ,3 & 4
• Which of the following statements about supply-side economics is correct?-Supply-side policies are used to improve the economy’s
efficiency and competitiveness
• Which of the following sectors of the developed economies contributes most to their countries’ gross domestic product?-The
service sector
• Which of the following events might cause the demand curve for chicken meat to shift to the right?-the publication of health report
urging people to eat white rather than red meat
• Which of the following is not a characteristic of pure public good-It is always provided by the state or public sector
• Which of the following would lead to an increase in a firm’s share price?-Management announces that profit will be higher than had
previously been forecast
• Which of the following is an example of regulation as a form of government intervention in the economy?-The government
requiring that seat belts are fitted in all coaches and regularly tested
• Which of the following is not a reason for a firm to issue bonds rather than ordinary shares to raise additional finance?-Lower risk
because bond holder cannot liquidate…………
• Which of the following is an example of a firm experiencing an increase in technical efficiency?-Increasing output and profit
• Which of the following is not suitable way for a manufacturing company to finance buying asset?-Commercial bonds
• Which of the following is not a consequence of a country suffering a high rate of inflation?-Excess aggregate demand for goods and
services
• Which of the following economic condition is likely to lead to demand-pull inflation?-An increase in government spending and firms
operating at full capacity
• Which of the following is not a method for measuring national income?-the transactions method
• Which one of the following will not decrease the transactions demand for money?-A fall in price level
• Which of the following is the best definition of the broad money stock?-All cash and bank deposits
• Which of the following would not be a reason for a government to impose a quota on imports?-To prevent completely the country’s
citizens consuming an imported demerit good
• Which one of the following statements about production decision in the short run is false?-A firm will only increase out put if
presently MC
• Which of the following industries would be expected to have the largest number of business operating within them?-Agriculture
• Which of the following best describes a project that has a negative Net Present Value?-A project that doesn’t make sufficient returns
to fully compensate investors for the funds they invest in it
• Which of the following statements about the subject of economics are correct?-The main purpose of economic activity is to increase
economic welfare/Economics studies the problem of allocating scare resources between competing uses-1&4
• Which of the following assertions would be consistent with supply side economics?-Increasing aggregate demand will not affect
national income or the price level
• Which of the following is most likely to increase rather than to reduce market imperfections?-Informative advertising giving way to
persuasive advertising
• Which of the following is not a suitable way for manufacturing company to finance buying assets?-Certificate of deposits
• Which of the following statement about public goods us correct?-Public goods are characterized by the free-rider problem
• Which of the following statements must be true when a firm’s average total costs and average variable cost are identical?-Total
EC=0
• Which of the following statements describes the role of an agent-One who is responsible for the organization pursues the interest of
owners
• Which of the following statements is always true for a merit good?-When consumed, the social benefits exceed the private benefits
• Which of the following will not lead to an appreciation of a countries currency?-A decrease in inflow capital
• Who will be affected by a currency depreciation?-Importers
• When the income of individual increase from 2000 to 2400 the demand for an item increases by 10%?-The product is a normal good
• Why cannot the private sector provide public goods such as street lighting?-Free rider problem
• Which of the following about inflation is not true?-It shift wealth from debtors to creditors
• Which of the following may not be an indicator that an economy is recovering from a recession?-An increase in unfilled vacancies
• Which of the following definition would fit monopolistic competition?-Many sellers of differentiated products
• Which of the following industries will achieve the largest fall in the sales, output and employment if an economy moves in to
recession?-Automobile manufacture
• Which of the following do you think is the main aim of the government competition policy?-Restricting anti competitive behavior of
firms
• What does the existence of natural rate of unemployment indicate?-Government cannot reduce employment below this level
• Which of the following is a normative statement?-If welfare payments are cut poverty will increase
• Which of the following might cause the demand for chicken meat to shift to the right-A health report favoring white meat
• What does the accelerator principle shows that the demand for investment spending?-Fluctuates wider than consumer spending
• Which of the following could be regarded as the increase in regulation by a government in an economy?-Government privatizing a
state venture
• Which of the statements about a firms cost are not true?-Average variable cost are first increase and then decrease as output rises
• Which of the following could be regarded as criticisms of the market economy?-Ignores some of the costs and benefits with production
and consumption of goods and services
• Which of the following is normal profit not?-A reward for risk taking
• Which of the following explain the structure of interest rate?-The existence of margins between borrowing and lending rates
• Which of the following does not appear to involve the principle of diminishing marginal utility?-The second cup of coffee tastes
better than the first cup
• Whenever demand for a good is once elastic. An increase in price will-Decrease total consumer expenditure on the good
• Which of the following would not shift the production possibility frontier to the right?-Fall in unemployment
• Whenever a government provides health care services free of charge-Provision of merit goods by the state is taking place
• What is meant by a Eurobond?-A bond dominated in a currency that differs from the domestic currency of the country where the bond was
issued.
• What is economy is in a recession, which of the following is least likely to reduce unemployment?-A regulation extending
employment rights for newly-hired workers
• When the price of good increases, the total revenue received by the supplier decreases, then-The demand for the good must be
price elastic
• Which of the following likely to cause the demand curve of margarine in shift to the left?-A successful advertising campaign by butter
producer
• Which of the following would not be an argument for privatizing a state industry?-It is a natural monopoly
• Which of the following would not be supply side economy policy?-Imposing tariffs to protect domestic industries.
• Which of the following is an indication of allocative efficiency?-The price is set to marginal cost
• When will be the welfare from an activity be maximum?-MBB=MSC
• Why is government against horizontal mergers?-It will result in excessive concentration in industries
• Which of the following will not cause X inefficiency?-Competition increasing
• Which of the following statements about the market economy are not true?-Transaction can only take place at equilibrium prices in a
market economy
• Which of the following would be a forward vertical integration?-IOC buying petrol station in Sri Lanka
• Which of the following may not be the role of a stock market?-Dealing in foreign currency
• Which of the following will make the demand for tea to shift to the left?-A successful worldwide campaign by Nestle to Nescafe
• Which of the following may not be a situation of economies of scale?-Greater opportunities for technical change
• Which of the following would not affect the supply curve of a good?-A change in the market price of a good
• Which of the following situation would a quota become irrelevant?-To plan the orderly decline of industries losing competitive
advantage
• Which of the following statements clearly indicate that a firm is not operating under conditions of perfect competition?-The
marginal revenue of the firm lies below the average function
• Which of the following would be claimed by supply side economist as an approach to reducing long term unemployment?-Income
tax cut to promote labour market incentives
• Which of the following are true with regard to the governments provision of education in an economy?-The provision of merit good
take place
• Which of the following may not cause the onset of a recession?-A significant appreciation of exchange rate
• Which of the following would occur at a firms technically efficient output level?-Marginal cost equals average total cost
• Which of the following are not correct when a government spends without increasing taxation?-Expansionary monetary policy is
taking place
• Which of the following are implications on a local firm by the process of globalization?-It will be more and more affected by changes
in exchange rates
• Which among the following will not reduce unemployment when there is recession in an economy?-A law is passed providing high
level of job security for new workers