CAF 02 CHP Wise Past Paper

CAF 02 – Introduction to Economics and Finance Practice &
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CHAPTER 1: FUNDAMENTALS OF ECONOMICS
Q.1 Distinguish between a pure capitalist economy and a mixed economy. Also discuss the main characteristics of a mixed
economy.
(ICAP CAF2, Spring 1988)
Q.3 What do you understand from the term “Mixed Economy”? How much role of government is justified in your opinion?
(36 minutes)
Q.4 What is meant by an economic system? Discuss different systems in brief? Does Pakistan have a Mixed Economy?
(29 minutes)
Q.6 Describe basic different problems of economics. How are they solved in a capitalized economy? (18 minutes)
(ICAP, CAF 02, Spring 1994)
Q.8 Explain the concept of Zakat. Discuss its economic significance. (18 minutes)
(ICAP, CAF 02 Autumn 1994)
Q.9 Write notes:

(a)Price Mechanism (11 minutes)
Q.10 Mixed Economy (9 minutes)

Q.11 Write short note on Mixed Economy. (Marks 2.5)

Q.13 (a) What are the essential features of a market economy? (16 minutes)
(b) How are these different in a planned economy? (16 minutes)
(ICAP CAF2, Autumn 1994)
Q.15 Write notes:

(a)Price Mechanism (11 minutes)
(ICAP, CAF 02 Spring 1995)
Q.16 Write Notes:
(c)Opportunity Cost (11 minutes)
Q.17 Write notes:

Distribution of Wealth in Islamic Economy (02 marks)
(ICAP, CAF 02 Level – Autumn 1995)
Q.18 Write Notes:

Opportunity Cost (11 minutes)
Q.19 With reference to the experience of Pakistan, discuss the merits and demerits of Mixed Economy.
(ICAP, CAF 02 Level – Spring 1996)
Q.20 Write notes:

The Salient Features of Islamic Economy (7 minutes)
Regards:Awais Ali
Regards:Awais Ali
Caps College OfAli
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Q.21 With reference to the experience of Pakistan, discuss the merits and demerits of Mixed Economy.
Q.22 Give the precise answers of the following:

a) What is opportunity costs? (Marks-2)
b) How does the Market Economy function? (Marks-2)
Q.24 Briefly discuss with the help of examples the following terms in your own words:
a) Economic Goods b) Free Goods
c) utility d) Rent
e)Wages f) Interest
g)Profit h) Demand
i) Price
(Marks-10)
Q.25 Write short note on Opportunity cost. (Marks-5)

Q.26 What do you mean by ‘economic system’?

Q.27 Compare the working of market economy and planned economy. (15)
Q.28 Describe the main features of ‘mixed economy’ with special reference to Pakistan.
Q.29 Explain and illustrate the production possibility frontier.

Q.31 Pakistan’s economy may be classified as a ‘Market Economy’. Explain the statement with reference to the characteristics
of market and controlled economics. (10)
Q.32 Describe the following briefly:

(b) Concept of Scarcity (03)
(c) Opportunity Cost (04)
Q.33 In Market Economy, the price mechanism solves the central problems of Economy. Discuss. (10)
Q.34 Enumerate the main characteristics of the Market Economy and the Planned Economy. (10)
Q.35 Discuss the factors on which capital formation in a country depends. (04)
Q.36 (a) Define and explain (by giving appropriate examples) the concept of ‘opportunity cost’? (05)
Q.37 Distinguish between Microeconomics and Macroeconomics and elaborate their respective fields of study.
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Q.38 Enumerate the merits and demerits of Market Economy. (10)

Q.39 Highlight the salient features of Mixed Economy. (08)

Q.40 Define opportunity cost. (03)

Q.41 Briefly describe the merits and demerits of capitalism. (07)

Q.42 What is meant by division of labour?

Q.44 Land is one of the factors of production. Explain the economic meaning and characteristics of land. (05)
Q.45 What do you understand by the term ‘market mechanism’? How does it solve the basic economic problems? (07)
Q.46 Explain the role of the ‘state’ in a mixed economy. Illustrate with examples. (08)
Q.47 (a) Identify the advantages of socialistic economy as opposed to capitalism. (05)
(b) Explain the term ‘opportunity cost’ with the help of an example. (04)
Q.48 Describe the term ‘Land’ as a factor of production.

Q.49 Highlight the main differences between microeconomics and macroeconomics. (06)
Q.52 Draw and briefly explain the “Production Possibility Curve”. (07)
Q.53 (a) What do you understand by the concept of “Consumer Sovereignty”? (02)
(b) Briefly describe the demerits of Free Market Economy. (07)
Q.54 What do you understand by the term Division of Labour?

Q.56 (a)What is “Market mechanism”? Explain how it resolves the basic economic problems. (07)
(b)Draw a production possibility curve from combinations of consumer goods and capital goods as set out below:
Possibilities A B C D E
Consumer Goods 120 100 80 50 0
Capital Goods 0 30 60 80 100
(03)
Q.57 (a) Explain how the resource allocation choices are made in a market economy and in a planned economy. (04)
(b) State any four disadvantages of a planned economy. (04)

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Q.58 What do you understand by the term Division of Labour? Briefly describe any four advantages and disadvantages of
division of labour. (10)
Q.59 Briefly discuss the important features of ‘Islamic economic system’. (08)
Q.60 (a) What do you understand by the term “Production Possibility Curve” (PPC)? Why is PPC downward sloping and
concave to the origin? (04)
(b) Under what conditions would PPC shift outwards? (03)
Q.61 In view of the scarcity of means and the multiplicity of ends, the economic problem lies in making the best possible use of
resources to get maximum satisfaction. Briefly discuss how resources are allocated under different economic systems to
optimize their use. (06)
Q.62 Free market economy permits private ownership and control of factors of production.
However, it is argued that it often results in exploitation of weak economic agents because of which government
has to intervene to control and regulate the economy in several ways.
In the light of above, explain the role of government in a mixed economy. (06)
Q.63 (a) Explain the concept of Production Possibility Curve (PPC) with the help of a diagram. (07)
(b) Briefly discuss how the concept of PPC is useful in explaining the economic concept of ‘scarcity’. (03)
Q.64 (a) What do you understand by the term ‘Factors of production’? What types of factors of production are used by a
school? (03)
(b) Briefly describe any four core features of Islamic economic system. (04)
Q.65 (a) Economic problems affect different agents within an economy in different ways.
Define three main types of such agents in an open economy. (03)
(b) What do you understand by the term ‘Planned economy’? How resource allocation choices are made in a planned
economy? Also state any three benefits of planned economy. (05)
Q.66 (a) What do you understand by the term ‘Capital formation’? Briefly describe the stages involved in the process of capital
formation. (04)
(b) Following data relates to a country Ruritania which is capable of producing the following combinations of consumer
goods and capital goods with a given quantity of resources and technology:
Consumer goods 140 120 100 70 0
Capital goods 0 60 80 100 120
Required:
(i) With the help of above data, draw a production possibility curve. (03)
(ii) Ruritania, after full utilization of its resources, is currently producing 70 units of consumer goods. What would
be the opportunity cost to Ruritania in terms of capital goods if it decides to produce 50 more units of consumer
goods? (01)
Q.67 Explain the role of State in a mixed economy. (08)


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CHAPTER 2: MICROECONOMICS-DEMAND AND SUPPLY
Q.1 What exactly is meant by Demand in Economics? What is the difference between Demand and Want? What are the factors
governing Demand? Discuss in detail.
Q.2 What are the basic laws of Demand and Supply?

Q.3 Explain the laws of demand and supply? How does reduction of supply affect the equilibrium price and quantities?
Q.4 What is law of Demand? What are the determinants of Demand?

Q.5 State the Law of Demand. Explain it with the help of a schedule and a diagram.
Q.6 Give short answers of the following:

What is the usual shape of Demand Curve, and Why?
Q.7 (a) Explain the law of Demand.

(b) What is its relation to the principle of diminishing utility?
Q.8 Describe ‘Substitutes’ and ‘Complementary Goods’. (03)

Q.9 According to the law of demand, when price of a commodity increases, its demand falls. The law holds good under certain
assumptions. Briefly describe these assumptions and the limitations of the law. (06)
Q.10 Briefly describe the factors that are mainly responsible for determining the quantum of supply in the market. (09)
Q.12 According to law of demand, other factors remaining the same the quantity demanded rises when price decreases and
vice versa. Briefly describe the factors which cause the demand to rise or fall when price remains the same. (08)
Q.13 Explain any four factors on account of which the demand of a product may change even when its price remains the same.
(06)
Q.14 According to the law of supply, supply of a product increases when the price increases. Briefly describe the other factors
that affect the quantum of supply of a product. (09)
Q.15 Differentiate between substitute goods, complimentary goods and independent goods. Give two examples of each. (06)
Q.16 Describe consumption goods and state the main determinants of demand for these goods. (02)
Q.17 What is meant by “Competitive goods” and “Complementary goods”? Give two examples of each. (04)

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Q.18 Describe and differentiate between the concepts of “Change in quantity demanded” and “Change in demand”. Draw
diagrams in support of your answer. (10)
Q.19 List any four factors which are responsible for each of the following:
 Change in demand (02)
 Change in supply (02)
Q.20 (a) What do you understand by ‘Change in Quantity Supplied' and ‘Change in Supply'?
(02)
(b) Briefly explain any five factors that are responsible for ‘Change in Supply'.
(05)
Q.21 What do you mean by demand? Discuss the law of demand. (15)
Q.22 (a) Describe the law of demand. Support your answer with the help of a diagram. (05)
(b) Briefly describe any four exceptions to the law of demand. (06)

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CHAPTER 3: DEMAND AND SUPPLY: ELASTICITIES
Q.1 What factors determine the Elasticity of Demand? How will you distinguish between ‘Point Elasticity’ and ‘Arc Elasticity’?
(20)
Q.2 What is meant by price elasticity of demand? How is it measured? Use diagrams. (10)
Q.3 What is meant by price elasticity of demand? How is it measured? Use diagrams. (10)
Q.4 Write short note on Equilibrium price.

Q.5 (a)
What do you understand by:
(i) income elasticity of demand, and (02)
(ii) cross elasticity of demand. (02)
(b)
Product Zeta currently sells for Rs.10 per unit and the demand at this price is 22,000,000 units. If the price fell to Rs.8 per
unit, demand would increase to 27,000,000 units. Compute price elasticity of demand and interpret your result. (05)
(c)
‘The price elasticity of demand of cigarette is low’, Discuss the importance of this statement for a government policy
maker involved in levying taxes to generate revenues. (05)
(d) What does unit elasticity of demand signify? (02)

Q.6 Identify the factors which determine the Elasticity of Demand of Normal Goods. (05)
Q.7 Bring out the significance of Price Elasticity of Demand for individuals as well as for the state. (05)
Q.8 What are the factors that affect the price elasticity of demand? (09)
Q.9 Elaborate the relationship between supply and time with the help of diagram. (06)
Q.10 Explain the term “price elasticity of demand”. Briefly describe the factors that affect the price elasticity of demand. (07)
Q.11 Explain what is Movement along the Demand Curve and Shift in the Demand Curve highlighting the difference between
these two concepts. Also illustrate the difference by means of diagrams. (09)

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Q.12 (a) What is meant by Elasticity of Demand? List and explain briefly the factors which determine the Elasticity of Demand
of a product. (07)
(b) Briefly describe when Demand for a product is considered to be:

 Highly Elastic
 Unit Elastic
 Relatively Inelastic (03)
Q.13 Define Price Elasticity of Demand. Compute the price elasticity of a product if a decline in the price of the product from
Rs.12 per unit to Rs.11 per unit increases its demand from 48,000 units to 60,000 units. (04)
Q.14 Explain briefly by means of diagrams, the concepts of Unitary Elastic Demand, Relatively Elastic Demand, and Relatively
Inelastic Demand. Also, state the impact of a decrease in price on total expenditure in each of the different types of
elasticities of demand. (12)
Q.15 (a) Explain briefly the factors which determine the Price Elasticity of Demand. (06)
(b) Illustrate the relationship between the price and quantity demanded with the help of a diagram when the price
elasticity of demand is Elastic, Unitary Elastic and Inelastic.
(Explanation is not required) (06)
Q.16 Briefly explain the following:

(i) Income elasticity of demand (05)
(ii) Cross price elasticity of demand (05)
Q.17 (a) State the meaning of ‘price elasticity of supply’. Briefly discuss different types of elasticity of supply. (05)
(b) Briefly explain the factors which determine the price elasticity of supply. (05)
Q.18 Analyse the effect of imposition / increase of indirect taxes on producers and consumers and its relationship with the
elasticities of demand and supply. (10)
Q.19 Illustrate with the help of a diagram, how new equilibrium market price of a good isachieved when price of substitute
good increases. (06)

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Q.20 (a)
(i)The quantity demanded for Alpha decreases from 300 units to 250 units, when the price of Beta increases from Rs.50 to
Rs.55.
(ii) The quantity demanded for Gamma increases from 400 units to 450 units, when the price of Delta increases from
Rs.100 to Rs.125.
For each of the above cases, you are required to:

determine the Cross Price Elasticity of Demand (XED) and (04)
on the basis of XED determined above, comment on whether the goods are substitutes or complements. (04)
(b) State why firms need to know XED of their products. (03)
Q.21 (a) Define the concept of ‘Price elasticity of supply’ and how it May be calculated. Identify the factors which would
increase the price elasticity of supply. (05)
(b) What do you understand by ‘Reservation price’? Briefly describe three factors which May affect the reservation price.
(05)
Q.22 List the factors which determine the price elasticity of demand of a commodity. Briefly describe what characteristics of a
commodity are indicated by a negative or a positive sign of ‘Income elasticity of demand’ and ‘Cross price elasticity of
demand’ of that commodity. (06)

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CHAPTER 4:UTILITY ANALYSIS
Q.1 Marginal utility means the additional utility a consumer gets from consumption of an additional unit of a commodity. How
does the concept apply to;
(i) Normal goods
(ii) Money (04)
Q.2 Give short answers of the following:

What is meant by Budget Line? (03)
Q.3 Demonstrate your familiarity with indifference curve approach to problem of consumer preference. How is it better than
the alternative approach of Marginal Utility?
Q.4 What do you understand from Law of Diminishing Marginal Return? Why does it apply to all kinds of economic activity at
a certain stage? Explain with reasons and examples.
Q.5 What do you understand from indifference curve approach and analysis? Is this approach superior to utility approach?
Discuss with illustrations.
Q.6 Write notes:
(a)Properties of Indifference Curves
(b)Income Effect
Q.7 Write notes:
(a)Indifference Curve Analysis
(b)Substitution Effect
Q.8 Write short note on the Income Effect.

Q.9 Write short noted on Substitution Effect.

Q.10 With the help of a schedule and a diagram, explain the determination of price in a Market Economy. (10)
Q.11 What is meant by consumer’s equilibrium? Elucidate the concept with the help of indifference curves. (10)
Q.12 What is meant by Consumer’s Equilibrium? Elucidate the concept with the help of Indifference Curves. (10)
Q.13 Why are the Indifference curves convex to the origin? (02)
Q.14 Write short note on Consumer surplus.

Q.15 Write short note on Indifference curve analysis. (05)

Q.16 ‘Two indifference curves on a single indifference map never intersect each other’. Comment with the help of a diagram.
(06)

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Q.17 (a) State five assumptions on which the analysis of Consumer’s Equilibrium is based. (05)
(b) Using indifference curves analysis, explain the equilibrium of a consumer with the help of a diagram, at which point in
the diagram is it in equilibrium and why? (12)
(c) In context of Consumer’s Equilibrium, explain the effect of a change in income when the goods being used are ‘inferior’.
(03)
Q.18 Analyse the Marginal Utility approach to consumer behaviour. (05)

Q.19 (a) How marginal utility theory of consumer demand differs from indifference curve theory? (03)
(b) Explain how the indifference curve and budget line apparatus are used to derive a consumer demand curve. For a
demand curve, certain things are held constant, what are they? (12)
Q.20 How would the demand for Article A change when the price of Article B goes up:
(a) When A and B are complements
(b) When A and B are substitutes
In answering parts (a) and (b) give appropriate examples of complements and substitutes. (08)
Q.21 Define Indifference Curve. State its three main properties. (08)
Q.22 (a) Explain why indifference curves for economic goods are negatively sloped? (04)
(b) What is the implication of a positively sloped indifference curve? (03)
(c) Diagrammatically show the income and substitution effect of a price increase for a Normal good.
Q.23 What do you understand by the law of diminishing marginal utility and what are the limitations of the law of diminishing
marginal utility? (05)
Q.24 (a) Briefly explain the term ‘marginal rate of substitution’ with the help of a table. (04)
(b) Why does marginal rate of substitution diminish? (03)
Q.25 Describe the consumer’s equilibrium using indifference curve approach. (10)
Q.26 Explain the following concepts with reference to consumer behaviour, using appropriate diagrams:
Price effect
Substitution effect
Income effect (12)
Q.27 (a) Explain the term marginal rate of substitution with the help of an example. (04)
(b) Why does the marginal rate of substitution diminish? (03)
Q.28 Demonstrate your familiarity with the indifference curve approach to the problem of consumer’s equilibrium. Support
your description by drawing suitable diagram. (12)
Q.29 Discuss practical importance of law of equi-marginal utility. (07)

Q.30 (a) Describe the Law of Diminishing Marginal Utility. (03)

(b) When is a consumer in an Equilibrium position? (02)
(c) Narrate the assumptions applicable to the indifference curve approach. (03)

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(d) With the help of Indifference Curve show how consumers maximize their levels of satisfaction. Support your decision
by drawing a suitable diagram. (07)
Q.31 (a) Narrate the basic assumptions applicable to the Indifference Curve Approach. (03)
(b) Explain consumer’s equilibrium with the help of a diagram using indifference curves. (09)
Q.32 (a) Briefly explain the Law of Equi-Marginal Utility. Also narrate the basic assumptions applicable to the Law of Equi-
Marginal Utility. (05)
(b) Mr. Khan wants to spend Rs. 100 on two commodities, Rice and Sugar. Following table shows the marginal utility (MU)
derived from both of these commodities:
Units of money (Rs.) MU of Rice MU of Sugar
20 10 12
40 8 10
60 6 8
80 4 6
100 2 3
Explain briefly Mr. Khan’s equilibrium position with the help of a diagram using the principle of Equi-Marginal Utility. (06)
(c) Describe the limitations of the Law of Diminishing Marginal Utility. (05)
Q.33 (a) What do you understand by the terms Iso-cost line and Iso-quant curve? How does a producer maximize his level of
output? Support your answer with the help of a diagram. (11)
(b) What is meant by “Decreasing returns to scale”? Describe its main causes. (06)
Q.34 (a) What is an indifference curve? List the properties of an indifference curve. (03)
(b) Explain the Law of Diminishing Marginal Rate of Substitution with the help of indifference curve analysis. (06)
Q.35 What do you understand by the term Consumer’s Surplus? Briefly discuss seven difficulties in the precise measurement of
consumer’s surplus. (11)
Q.36 State and explain the law of Equi-Marginal Utility with the help of a diagram, assuming there are only two commodities i.e.
A and B and the consumer has limited income at his disposal. (08)
Q.37 Describe the Law of ‘Diminishing marginal utility’. Support your answer with the help of a schedule and a diagram. (07)
Q.38 Explain the concept of consumer equilibrium with the help of indifference curve analysis. (08)
Q.39 Define the law of ‘Equi-marginal utility’ and list the assumptions underlying the law.Also describe any two limitations of
the law of equi-marginal utility. (07)
Q.40 Briefly explain, with the help of a suitable example, how law of equi-marginal utility operates. (07)

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CHAPTER 5: COSTS, REVENUES AND FIRMS
Q.1 Describe the different ways in which a product May be differentiated. (05)
Q.2 Write Notes:

(-)Internal and External Economies (05)
Q.3 “As the proportion of one factor in a combination of factors is increased, after a point, first the marginal and then the
average product of that factor will diminish.” Explain the statement and illustrate it with the help of schedule and
diagram. (20)
Q.4 What is meant by “Capital”? How is it different from other factors of production? (20)
Q.5 Identify and briefly discuss various factors of production. (20)

Q.6 Explain and illustrate the determination of long-run normal price under perfect competition. (20)
Q.7 What do you understand from the term “Monopolistic Competition”? How are the prices determined under this system?
Discuss with examples and diagrams. (20)
Q.8 What is meant by a firm in Economics? What is the concept of Equilibrium of a Firm? Discuss clearly. (20)
Q.9 What is meant by competitive situation or conditions of perfect competition in Economics? Discuss with examples and
diagrams. (16)
Q.10 Discuss the application of Law of Diminishing Marginal Returns in the field of industry. What is the basic reason of
inevitability of this law in economic life? (16)
Q.11 What is meant by monopolistic competition? How are the prices determined under this situation? Give examples and
support your discussion with diagrams. (16)
Q.12 What is meant by “equilibrium of a firm”? What are the conditions of equilibrium? Discuss in detail with examples. (16)
Q.13 What do you -understand by “Perfect Competition”? Give some examples of markets where perfect competition prevails
in our practical life. How are the prices determined under this kind of market conditions. (16)
Q.14 List distinguishing features of perfect and imperfect competition. What are the main varieties of imperfect competition?
How would you classify (i) PIA, (it) Pakistan Steel Mills and (Hi) A Local Super Market. (16)
Q.15 What exactly is meant by “equilibrium of a firm”? How is it achieved and maintained? Discuss clearly. (16)
Q.16 Explain the Law of Diminishing Returns. Discuss its limitations. (10)

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Q.17 Write Notes:

(-)Fixed and Variable Costs (05)
Q.18 Write short notes Fixed Cost and Variable Cost. (2.5)
Q.19 Explain the Law of diminishing returns. Discuss its limitations. (10)
Q.20 Write Notes:

(a)Law of Diminishing Returns (09)
(b)Law of Increasing Returns (06)
Q.21 What is perfect competition? Explain with the help of a diagram the short-run equilibrium position of a competitive firm.
(16)
Q.22 What do you understand by the equilibrium of the firm? Explain with the help of a diagram the short period of a
competitive firm. (10)
Q.23 Write notes:

(-)Monopolistic Competition (05)
Q.24 What do you understand by the equilibrium of the firm? Explain with the help of a diagram the short period equilibrium
position of a competitive firm. (10)
Q.25 Write a short note on Monopolistic competition. (05)

Q.26 Write Notes:

(-)Law of Increasing Returns (06)
Q.27 Write notes:

(a)Monopolistic Competition (05)
(b)Assumptions of Perfect Competition (05)
Q.28 Enumerate the assumptions of Perfect Competition. (10)

Q.29 Write a note on the concept of Marginal Revenue Product. (04)

Q.30 Write short notes on “The concept of Marginal Revenue Product”. (Marks-10)
Q.31 A competitive Firm can earn only Normal Profit in the Long run and its MC = MR = AC = AR = P.
Explain and illustrate. (10)
Q.32 What exactly is meant by Marginal Revenue? (03)

Q.33 How are the prices determined under the conditions of Monopolistic or Imperfect, Competition?
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Discuss with the help of diagrams. (10)

Q.34 Under perfect competition, marginal revenue is the same as price. But under monopoly, margin revenue is less than price.
Explain.
Q.35 Diminishing return is the result of the scarcity or relevant factors of production! Discuss.
Q.36 What are the distinguishing features of perfect and imperfect competition? (15)
Q.37 What is oligopoly? Mention the features of oligopolistic market situation?

Q.38 What is the law of diminishing return? Does it apply both to agriculture and industry?
Explain the rationale of this law.
Q.39 Distinguish between a perfectly competitive and an imperfectly competitive market structure of an Economy. (15)
Q.40 (a) Draw a labeled diagram of equilibrium of a firm in the long run under perfect competition. Explanation is not required.
(06)
(b) What is ‘Price Discrimination’? Such discrimination is profitable for the seller under certain conditions. Please explain.
(08)
Q.41 There are circumstances under which a government that is normally committed to the principles of a ‘Free Market’
decides to take interventionist measures. List down such circumstances. (05)
Q.42 In ideal case of a perfect market, factors of production will move to whichever use of factor provides higher reward. If
‘labour market’ were perfect, labour will move in response to better wage rates obtainable in other regions or in other
jobs. In practical world, we observe many ‘obstacles’ to the mobility of labour. Discuss such obstacles. (10)
Q.43 Explain and illustrate the Equilibrium of a Firm under Monopolistic-Competition? (10)
Q.44 (a) What do you mean by Market? (03)

(b) Briefly classify the Market-Structure on the basis of competition. (12)
Q.45 (a) Differentiate between Short-Run and Long-Run in relation to Cost. (05)
(b) Describe briefly the Internal and External Economies of Scale. (10)
Q.46 A perfectly – competitive firm is in equilibrium when its MC=MR and MC curve cuts MR curve from below. Explain and
illustrate. (10)
Q.47 What is meant by Normal Profit? (05)

Q.48 (a) The Perfect Market is only a theoretical concept. Discuss. (05)
(b) Bring out economic arguments against the Monopoly. (05)
Q.49 The Law of Increasing Returns is also called the Law of Diminishing Cost. Explain with the help of a schedule. (10)

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Q.50 (a) Define a market and enlist the factors which determine its extent. (05)
(b) What is meant by Monopolistic-Competition? Enumerate its main characteristics. (05)
Q.51 Why is Short-Run Average Cost Curve (SAC) U-shaped? Explain briefly, also draw diagram of SAC. (10)
Q.52 Define Oligopoly. Briefly describe its three important characteristics. (05)
Q.53 Is the Monopoly-Price always higher than the Competitive-Price? Discuss. (09)
Q.54 Explain, with the help of a diagram, the relationship between ‘Marginal’ and ‘Average’ cost of production in the short run.
(07)
Q.55 What are the characteristics of ‘perfectly competitive market’? (05)

Q.56 What is meant by ‘Economies of Scale’? Give examples. (07)

Q.57 Explain the short and long run equilibrium of a firm under monopolistic competition with the help of diagrams. (10)
Q.58 Explain the short and long run equilibrium of a firm under monopolistic competition with the help of diagrams. (10)
Q.59 Explain the law of diminishing returns giving suitable example and diagram. Under what circumstances does the law
operate? (09)
Q.60 Explain the shutdown point of a firm under perfect competition with the help of a diagram. (07)
Q.61 Explain the meaning of ‘oligopoly’? Describe its economic effects. (05)
Q.62 Elaborate the characteristics of a ‘monopoly’. (04)

Q.63 Under perfect competition, the price at which a seller will refuse to sell is called reserve price. What are the factors that
affect such price? (07)
Q.64 Price discrimination is said to exist when a firm is able to charge two or more different prices for the same commodity.
Explain how a firm uses price discrimination to increase its profits. Prepare appropriate diagrams. (10)
Q.65 (a) Explain the reasons because of which firms May come across with diseconomies of scale. (06)
(b) Explain, with reasons, the relationship among marginal revenue, average revenue and price under perfect
competition. (06)
Q.66 Describe the merits of small-scale production. (06)

Q.67 (a) Describe the process of credit creation by commercial banks with the help of an example. (08)

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(b) What role does the central bank play in controlling the process of credit creation? (06)
Q.68 Explain the process of profit-maximization by a monopolist with the help of an appropriate diagram. (08)
Q.69 Explain the concept of ‘Price Discrimination’. Describe the conditions under which a firm can resort to price
discrimination. (06)
Q.70 (a) Briefly describe the important characteristics of a market under perfect competition. (05)
(b) Explain the equilibrium of a firm under perfect competition, with the help of an appropriate diagram. (05)
Q.71 Explain the law of increasing returns. How does the law apply in the case of a manufacturing industry?
Q.72 Briefly describe the disadvantages of having a monopoly setup. (08)

Q.73 Discuss external economies and diseconomies of scale. (06)

Q.74 (a) What is meant by Marginal Physical Product? (02)

(b) Explain the Law of Diminishing Returns and describe briefly the assumptions under which the Law of Diminishing
Returns would be applicable. (Examples and diagrams are not required) (05)
Q.75 (a) Identify and explain the necessary conditions in which it would be possible for a monopolist to resort to price
discrimination and charge different prices for the same product in different markets. (06)
(b)Explain how a monopolist engaged in price discrimination in different markets would be able to earn maximum
revenues. (Diagram is not required) (05)
Q.76 State the Law of Increasing Returns and explain the reasons and factors responsible for operation of the Law. (05)
Q.77 (a) Explain the term Equilibrium of the Firm. (02)

(b) State the conditions which are essential for the existence of Perfect Competition in a market. (05)
(c) Explain by means of a diagram how price and output are determined in the long-run for a firm operating under
conditions of Perfect Competition. (08)
Q.78 (a) Discuss what is meant by Return to Scale. (03)

(b) Explain briefly the concept of Increasing Return to Scale and Decreasing Return to Scale and indicate why these
different phenomenon occur. (05)
Q.79 Explain six different features which distinguish a market functioning in an environment of perfect competition from a
market which operates as a monopoly. (09)
Q.80 (a) What do you understand by Perfect Competition? Briefly explain the important conditions which are necessary for the
existence of Perfect Competition in a market. (07)
(b) Explain with the help of an appropriate diagram, the Equilibrium of a Firm under perfect competition, in the long run.
(07)
Q.81 Briefly explain the following concepts:

(a) Consumer Surplus
(b) Price War

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Q.82 (a) What is “Price Discrimination”? Identify and describe briefly the conditions under which a monopolist can keep the
sub-markets separate for exercising price discrimination. (10)
(b) How a firm can improve its profits by using price discrimination? (Diagram is not required) (06)
(c) Briefly explain the concept of economies and diseconomies of scale. (04)
Q.83 (a) What is a reserve price? Describe the factors which govern the reserve price of a seller. (06)
(b) How do free forces of demand and supply determine equilibrium price and equilibrium quantity? Support your
answer with the help of a diagram. (07)
(c) Explain briefly why the short-run average cost curve is “U” shaped. (06)
Q.84 Explain with the help of a diagram, the shutdown point of a firm under perfect competition. (06)
Q.85 (a) Explain with the help of an appropriate diagram, the price output determination under monopolistic competition in
the short-run. (10)
(b) Briefly explain the factors on which the size of a market depends. (10)
Q.86 (a) What is ‘Price discrimination’? Give two practical examples of price discrimination. (03)
(b)Explain with the help of diagrams how a monopolist finds it profitable to charge discriminating prices when the
elasticities of demand in the two markets are different. (09)
Q.87 (a) Briefly discuss the term ‘Returns to scale’ and distinguish between the different phases of returns to scale. (04)
(b) What is the difference between ‘Returns to scale’ and ‘Law of variable proportions’. (02)
(c) In the context of law of variable proportion, explain with the help of a schedule and a diagram the relationship among
total, average and marginal product of labour. (10)
Q.88 (a) When the price is not at the equilibrium point there is a state of disequilibrium in the market. Explain with the help of
a diagram, disequilibrium which May exist when the quantity demanded is not equal to the quantity supplied. State how
forces of demand and supply May push prices from disequilibrium to equilibrium. (06)
(b) Briefly explain the important conditions which are necessary for the existence of Perfect Competition in a market. (05)
Q.89 deleted.
Q.90 The following data refers to the revenue and costs (in million rupees) of a firm.
Output (units) 0 1 2 3 4 5 6 7 8
Total revenue - 50 100 150 200 250 300 350 400
Total costs 110 140 162 175 180 185 194 219 269
(a) Briefly explain the concept of fixed costs with reference to the above data. (02)
(b) Determine the marginal revenue at each level of output and interpret the results. (04)
(c) What level of output will the firm aim to produce and what would be the amount of profit that the firm will
make at this level? (04)
Q.91 (a) State the main features of monopoly and name any one organisation which operates under monopoly. (03)
(b) Briefly explain the ‘monopolist’s equilibrium’ with the help of a schedule. (04)
Q.92 (a) What do you understand by “economies of scale”? Briefly discuss any four factors thatcontribute towards achievement
of economies of scale. (07)
(b) Explain economies and diseconomies of scale with the help of long run average costcurve. (04)

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Q.93 (a) Explain the term equilibrium of the firm. (02)

(b) Briefly describe the reasons on account of which a firm under perfect competition actsas a ‘price taker’ rather than a
‘price maker’. (05)
Q.94 Explain the law of variable proportions. Discuss the various stages of law of variable proportions with the help of a
diagram (schedule not required). Also explain at which stage a rational producer would stop production. (10)
Q.95 What do you understand by the term Perfect Competition? With the help of an appropriate diagram, explain the
Equilibrium of a Firm under perfect competition in the long run. (08)
Q.96 The following data refers to the total revenue and total costs of a firm at various output levels:
Output (units in million) 0 1 2 3 4 5 6 7 8 9
Marginal revenue (Rs.in million) - 12 12 12 11 11 10 10 10 9
Total costs (Rs.in million) 22 28 32 35 36 37 40 44 54 65
(a) Calculate the firm’s fixed cost and the marginal cost at each level of output. (03)
(b) Determine the level of output at which the firm would optimise its profits. Also determine the amount of profit
that the firm will make at the desired level of output. (05)
Q.97 (a) One of the characteristics of a monopolist is the ability to engage in price discrimination. Describe the term ‘Price
Discrimination'. Briefly explain the conditions which must exist to enable the monopolist to exercise the power of price
discrimination effectively. (04)
(b)Monopolist will be in equilibrium at that price-output level at which his profits are maximized. Explain the price-
output equilibrium of a monopolist with the help of a diagram. (08)
Q.98 (a) Oligopoly is the situation where industry is dominated by a few large suppliers. Briefly discuss any six features of
oligopoly. (06)
(b) When oligopolists fix prices by collusion among themselves, they are known as cartel. Discuss the factors that are
responsible for the success / failure of price cartel. (04)
Q.99 (a) Define the term ‘Economies of scale’? Describe any four ways by which a firm May achieve internal economies of scale.
(06)
(b) What is meant by ‘Oligopoly’? List any four advantages and disadvantages of Oligopolies. (05)
Q.100 Briefly describe the following diagram and the concept which it depicts. (08)

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Q.101 Describe the following diagram and the concept which it depicts. (06)
Q.102 (a) Briefly describe why the short-run average cost curve is U shaped. (05)
(b) Describe the law of variable proportion. Also state the assumptions on which the law of variable proportion is based.
(03)

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CHAPTER 6: MACROECONOMICS: AN INTRODUCTION
Q.1 What should be the economic goals of countries like Pakistan?

Q.2 deleted.
Q.3 What is meant by National Income on GNP of a country? How is it calculated or estimated? Give examples. (15)
Q.4 Briefly describe the various approaches used to measure National Income of an economy. Outline how double counting
can occur in such measurements and it can be avoided. (15)
Q.5 Write notes:

(-)Real and Nominal GNPs (05)
Q.6 Write short note on Real and Nominal GNP. (05)

Q.7 (a) Define the concept of National Income. (08)

(b) Discuss the methods to measure it. (08)
Q.8 Define the following terms:

(a) Gross Domestic Product (04)
(b) Gross National Product (04)
(c) Net National Product (04)
(d) Personal Income (04)
(e) Disposable Personal Income (04)
Q.9 Define the concept of National Income. How is it measured? (10)

Q.10 Write notes:

(-)Significance of National Income Accounting (04)
Q.11 Examine the steps taken by the Government of Pakistan in the recent past to accelerate the rate of growth of the National
Economy. (10)
Q.12 What is the difference between GNP and GDP? (03)

Q.13 How national income is measured? Explain with example. (15)

Q.14 Define National Income.

Q.15 Explain the process of national income generation with the help of flow income chart. (15)
Q.16 Explain what is national income? How is the national income estimated with the help of value added method?

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Q.17 Explain why the following would lead to an inward or outward shift in the aggregate demand curve:
(i) a rise in the price of substitute of a product,
(ii) a fall in the price of a complimentary good,
(iii) a fall in the income of consumers,
(iv) changes in tastes; and
(v) rise in population
(15)
Q.18 The Economic Survey of the government of Aladina discloses the following:
Rupees in millions
Government expenditure 7,500
Sales value of out put of firms 30,000
Imports 6,000
Profit before tax of firms 10,500
Consumers’ expenditure 16,500
Wages etc. received by employees 12,000
Tax deducted out of wages 1,500
Exports 6,000
Cost of goods and services purchased from outside firms 6,000
You are required to compute the Gross Domestic Product (GDP) by:
(i) expenditure approach (05)
(ii) income approach (05)
(iii) value added approach (05)
Q.19 Following data relates to the economy of a country over a year period.
Rs. In Millions
Capital consumption 2,625
Subsidies 450
Exports 9,675
Imports (9,360)
Consumers’ expenditure 27,600
Taxes on expenditure (4,140)
Net property income from abroad 315
Value of physical decrease in stocks (30)
Gross domestic fixed capital formation 7,380
General government final consumption 6,810
Required:
You are required to compute the following, showing necessary workings:
(a) Gross Domestic Product (GDP) at market prices and at factor cost (06)
(b)Gross National Product (GNP) at market prices and at factor cost (06)
(c)National Income at factor cost (03)
Q.20 (a) Diminishing returns to a single factor of production and constant returns to scale are not inconsistent. Discuss. (04)
(b) How does oligopoly differs from monopolistic competition? (04)
Q.21 (a) Outline the Expenditure approach to measure GDP, GNP, NNP and the National Income. (05)
(b) Describe the utility of computing the National Income. (05)
Q.22 (a) Enumerate the difficulties in measuring the National Income in the developing countries. (10)
(b) Examine the concept of Effective Demand. (05)
Q.23 (a) Define ‘National Income’ and describe the purposes of calculating the same. (06)

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(b) Explain with diagram the concept of ‘Circular Flow of Income’. (08)
Q.24 (a) Discuss the factors that have an adverse effect on the economic growth of a country. (06)
(b) Briefly describe the various types of unemployment. (04)
Q.25 Point out the main objectives of economic growth. State the essential requisites for economic growth. (10)
Q.26 Explain with the help of a diagram, how equilibrium of national income is determined. (08)
Q.27 Briefly narrate the difficulties in the measurement of National Income. (08)
Q.28 Explain inflationary and deflationary gaps in the economy using appropriate diagrams. (11)
Q.29 (a) Briefly describe three different approaches of measuring National Income. (09)
(b) What difficulties are usually faced in measuring National Income? (09)
Q.30 To achieve economic policy objectives, the government has a vital economic role in building the necessary infrastructure,
ensuring the availability of adequate financing facilities, moulding the social structure and adapting the legal framework
to the tasks of development.
(a) List down the main objectives of the economic policies of a government. (06)
(b) Briefly discuss the policy tools usually adopted by the government to achieve these objectives. (06)
Q.31 What do you understand by the term Gross Domestic Product? State the reason for excluding intermediate goods from the
calculations of GDP. (04)
Q.32 (a) Define the term National Income and list the components of National Income under the Income Method. (03)
(b) Briefly explain the important uses of National Income statistics. (04)
Q.33 In your opinion what are the three most important primary goals of a well conceived Macroeconomic policy? Briefly
discuss the significance of each of these macroeconomic goals. (06)
Q.34 (a) Draw a Diagram of Circular Flow of Income. (04)

(b) Identify and explain briefly the three different types of Withdrawals and Injections from the Circular Flow of Income.
(06)
Q.35 (a) How is Economic Growth measured? (01)

(b) List five ingredients which influence a country’s rate of Economic Growth. (05)
Q.36 What steps are usually adopted by the authorities to control inflationary pressures? (06)
Q.37 (a) Explain the relationship between Inflation and Unemployment with the help of a Phillips Curve. (06)
(b)
(i) Full Employment is achieved when the rate of Unemployment reaches zero. Discuss.
(ii) Identify and briefly describe various types of Unemployment. (12)

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Q.38 Define Macroeconomics.

Q.39 Explain with the help of a diagram using the concepts of Aggregate Demand and Aggregate Supply, how equilibrium level
of national income is achieved. (12)
Q.40 (a) What do you understand by the term National Income? (02)
(b) Explain briefly three different ways of measuring the National Income. (09)
(c) Enumerate the difficulties generally faced in measuring National Income. (09)
Q.41 Briefly discuss any four unfavourable consequences of unemployment. (04)

Q.42 Explain by means of a diagram the concept of deflationary gap in the economy. (06)
Q.43 What do you understand by the terms GDP, GNP and NNP? Briefly describe GDP at market price and GDP at factor cost.
(08)
Q.44 Briefly explain the “Flows” in a Circular Flow of Income. Draw a diagram of the Circular Flow of Income and identify three
types of ‘Withdrawals’ and ‘Injections’ intothe Circular Flow. (10)
Q.45 Briefly explain the economic problems which a country May face on account of highnational debt in relation to its Gross
Domestic Product. (04)
Q.46 Explain the concept of Inflationary Gap in an economy. Illustrate your answer with the help of a diagram. (06)
Q.47 How is Economic Growth measured? Discuss briefly the factors which are considered to be conducive for economic
growth of a country. (10)
Q.48 (a) Draw a diagram of Circular Flow of Income. (04)

(b) List three types of ‘Withdrawals’ and ‘Injections’ from/into the Circular Flow of Income. (03)
(c)Explain the effect of an increase in household savings rate on an economy. (03)
Q.49 Briefly describe ‘Demand deficient unemployment’ and ‘Structural unemployment’. (04)
Q.50 Briefly describe three different approaches to measure National Income. (06)
Q.51 Illustrate with the help of a diagram, the concept of deflationary gap in the economy. (04)
Q.52 (a) Define Phillips Curve. Explain the trade-off between unemployment and wage inflation with the help of a Phillips
Curve.
(b) Describe the type of unemployment that is generally observed during a period of recession in an economy.
Q.53 (a) What do you understand by Demand-pull inflation and Cost-push inflation? (04)
(b) Briefly discuss the probable causes of Demand-pull inflation and Cost-push inflation. (06)
Q.54 (a) Identify and briefly explain the different phases of business cycle. (06)

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(b) List any eight indicators which would confirm the stages of business cycle the economy is in. (04)
Q.55 Write notes on the following:

(i)Demand-pull and Cost-pull inflation. (04)
Q.56 (a) Discuss the concept of Consumer Price Index (CPI). State any three limitations of CPI as a measure of inflation. (06)
(b) Briefly discuss any two measures that May be adopted for controlling inflation if an economy is facing:
cost-push inflation
demand-pull inflation (04)
Q.57 Explain the concept of ‘Natural rate of unemployment’ with the help of a diagram. (05)
Q.58 What is meant by ‘Economic growth’? Briefly describe the benefits of economic growth. (08)
Q.59 (a) ‘Income method measures the national income after it has been distributed and appears as income earned or received
by individuals of the country’.
List the items which are excluded from the computation of national income under the income method. (03)
(b) Explain with the help of a diagram, the equilibrium of aggregate supply (AS) and aggregate demand (AD) under neo-
classical approach. (07)
Q.60 (a) Draw a diagram of the circular flow of national income. (04)
(b) Briefly discuss any two causes each of ‘Cost-push inflation’ and ‘Demand-pull inflation’. (06)
Q.61 (a)Identify and describe the stage of business cycle which eventually takes the economy into recession. (04)
(b) Alongside the benefits of economic growth, certain costs are also associated with it. Identify and discuss the costs
associated with economic growth. (06)
Q.62 (a) The following data relates to an open economy:

Consumption expenditure 0.4 Yd
Investment expenditure (Rs.) 300 million
Government expenditure (Rs.) 600 million
Exports (Rs.) 500 million
Imports 0.28Y
Where Y is the national income and Yd is the disposable income which is equal to 70% of the national income.
Required:
Calculate the following, showing necessary workings:
(i) equilibrium level of national income. (02)
(ii) fiscal surplus/deficit, if the rate of taxation is 30%. (02)
(b) According to the monetary economist Milton Friedman, a trade-off exists between unemployment and wage inflation
but only in the short-run. In the long-run, no such trade-off exists.
Explain, with the help of a diagram, the arguments put forward by Friedman in this regard. (06)

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Q.63 (a) The following data relates to the economy of a country over a one year period:
Rs. in billion
Domestic consumption 230,000
Taxes on expenditures 69,000
Government expenditures 51,750
Capital formation 58,650
Exports 80,500
Imports 74,750
Subsidy 5,750
Net property income from abroad 4,750
Capital depreciation 23,000
You are required to compute the following:

(i) Gross Domestic Product (GDP) at market price and at factor cost (03)
(ii) Gross National Product (GNP) at market price and at factor cost (02)
(iii) Net National Product (NNP) at market price and at factor cost (02)
(Show all necessary workings)
(b) Identify any six types of difficulties that are commonly faced in measuring National Income. (03)
Q.64 (a) Assume a small economy consisting of one firm. During a given period, the firm:
(i) imported raw materials amounting to Rs.90 million;

(ii) paid salaries to employees amounting to Rs. 180 million;
(iii)earned sales revenue of Rs.400 million, comprising of domestic sales of Rs.240 million, sales to government
organisations of Rs.90 million and exports of Rs.70 million;
(iv) distributed dividends of Rs.100 million to the shareholders. Taxes deposited on salaries paid to employees and on the
firm’s profits were Rs.40 million and Rs.50 million respectively.
Calculate the Gross Domestic Product under Expenditure, Income and Value-added approaches. (06)
(b) Identify any four important uses of National Income estimates. (04)

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CHAPTER 7: CONSUMPTION, SAVINGS AND INVESTMENT
Q.1 What is meant by investment? Describe the factors which determine the volume of investment in an economy. (10)
Q.2 Write a note on Consumption Function. (05)
Q.3 Write short note on “Consumption Function”. (05)

Q.4 What is meant by Marginal Propensity to Save (MPS)? Describe the factors which determine the rate of National Savings.
(10)
Q.5 Define Investment. Identify the factors which influence private investment. (10)
Q.6 Explain the concepts of Average Propensity to Consume (APC) and Marginal Propensity to Consume (MPC). (06)
Q.7 Describe the factors that affect the level of consumption and savings in an economy. (06)
Q.8 In response to a small increase in the investment level, there is a greater increase in national income. Explain the reasons
thereof with the help of a table. (07)
Q.9 Explain the concept of ‘Marginal Efficiency of Capital’. (05)

Q.10 There are various factors that influence the inflow of investments in a country. Briefly explain any six such factors. (09)
Q.11 (a) Describe the main factors that affect the general rate of interest in an economy. (06)
(b) Explain the term “Real Rate Of Interest” with the help of an example. (03)
Q.12 State briefly how a government can influence the level of private investment in the country. (10)
Q.13 Determinants of consumption function do not change in short run. Explain. (12)
Q.14 (a) What is “Marginal Efficiency of Capital”? Briefly state the level of interest up to which firms are willing to borrow
capital. Support your answer with the help of a diagram. (10)
(b) What do you understand by the term “Oligopoly”? Briefly explain the economic effects of oligopolistic markets. (05)
Q.15 (a) Briefly describe the main factors on which general rate of interest depends. (08)
(b) Differentiate between fiscal deficit and the national debt. What relationship exists between the two over a period of
time? Also discuss the direct effect of rise in interest rates on the fiscal deficit and the national debt. (08)
Q.16 Differentiate between “Autonomous” and “Induced” investments. Give any two examples of each. (04)
Q.17 (a)Discuss the Keynes’ Psychological Law of Consumption and the related propositions. (04)
(b) Briefly describe the determinants of consumption in an economy. (06)

Q.18 (a) The rate of interest and marginal efficiency of capital (MEC) determine the level of investment in an economy. Explain
the relationship between rate of interest and MEC with the help of a diagram. (07)
(b) The MEC curve shifts outwards when expected rate of return increases. Briefly discuss any three other factors that
might cause an outward shift in MEC curve. (03)
Q.19 Output is determined where savings of all of the households in an economy are equal to the desired investment
opportunities. Explain the equilibrium between savings and investments with the help of diagram. (10)
Q.20 In an open economy, the marginal propensity to consume is 0.7 and the proportion of additional income that is spent on
imported goods is 20%. National income is Rs.100,000,000 and the current account is in balance. What would be the new
equilibrium of national income if the government increases its expenditure by Rs.50,000,000? (02)
Q.21 (a) Explain the concept of ‘Marginal propensity to save’ and how it is calculated. Also explain any four determinants of
savings. (07)
(b) Briefly describe the concepts of ‘Autonomous and Induced consumption’. (03)
Q.22 (a) State Keynes’ Psychological Law of Consumption and the allied propositions. (04)
(b) Briefly describe any four objective factors which influence the consumption function in an economy. (06)

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CHAPTER 8: MULTIPLIER AND ACCELERATOR
Q.1 (a) Identify the main determinants of the National Savings. (10)
(b) Define the concept of Investment Multiplier. What determines its size? (05)
Q.2 (a) Elaborate the main factors that affect the general rate of interest in an economy. (05)
(b) Explain the term ‘Real Rate of Interest’ with an example. (03)
Q.3 (a) Explain what do you understand by the term Multiplier. (03)
(b) What are the limitations of the Multiplier? (06)
Q.4 Explain briefly the Accelerator Principle. Identify and explain any five limitations of Accelerator Principle. (08)
Q.5 (a) What is ‘Multiplier’? Explain the working of the Multiplier with the help of a numerical example. (for the purpose of
working, assume that marginal propensity to consume is equal to 0.6) (05)
(b) Briefly state the limitations of Multiplier. (04)
(c)The difference between increase in income and the increase in consumption represent a leakage from the flow of
income stream. These leakages obstruct the growth of national income.
(i) Discuss the principal leakages in the income stream and their effect on multiplier. (09)
(ii) What would be the effect on multiplier, marginal propensity to consume, investment and employment if there were no
leakages from the flow of income stream? (02)
Q.6 (a) Explain the Marginal Productivity Theory. Illustrate your answer with the help of an example. (06)
(b) Briefly explain five grounds on which Marginal Productivity Theory is criticised. (07)
Q.7 (a) What do you understand by the term ‘Multiplier'? With the help of a diagram show the multiplier effect of an increase
in investment by Rs. 100 million on the equilibrium level of income where marginal propensity to save is 1/3.
(b) Briefly explain any four measures by which government may influence the level of private investment in an economy.
Q.8 Illustrate the concepts of ‘Nominal interest rate’ and ‘Real interest rate’. (05)
Q.9 (a) Describe the principle of accelerator. Also state the assumptions underlying the principle of accelerator. (05)
(b) Identify and explain any four limitations of ‘Multiplier’. (05)

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CHAPTER 9: GROWTH AND TAXES
Q.1 Elucidate the meaning and phases of business cycle. (07)

Q.2 Why indirect taxes rather than direct taxes provide large public revenues in a developing economy such as Pakistan? Do
you favor the application of the ‘Principle of Minimum Sacrifice’ on taxation in Pakistan. (20)
Q.3 Why is taxation necessary? What is the difference between direct and indirect taxes? Discuss with examples of Pakistan.
(15)
Q.4 What is the difference between fiscal and monetary policy and what are the tools of each? Which one of the two is more
successful and commonly used in Pakistan? Give reasons and examples. (15)
Q.5 Pakistan economy is suffering from a huge budgetary deficit. What fiscal and monetary tools are likely to be effective in
narrowing this deficit. (15)
Q.6 Are you convinced that rate of growth in economy of Pakistan has been very slow in recent past. What are reasons?
Discuss with details and examples. (15)
Q.7 Write notes on:

(-) Objectives of Fiscal Policy (04)
Q.8 Write short note on Best System of Taxation. (2.5)

Q.9 Write notes on:

(-) Objectives of Fiscal Policy (04)
Q.10 Important Principles of Taxation

Q.11 What do you understand by the terms ‘regressive’, ‘proportional tax’ and ‘progressive tax’? Explain the concepts with
brief examples.
Q.12 Outline the qualities of a good tax system. (05)

Q.13 Identify three (3) major items of exports and imports in the Pakistan economy. (03)
Q.14 What is meant by ‘Indirect Taxes’? Identify major demerits of ‘Indirect Taxes’? (07)
Q.15 Identify and briefly explain the characteristics of a good system of taxation. (09)
Q.16 (a) What do you understand by the term ‘fiscal policy’? What are its main objectives? (06)
(b) What fiscal measures does the government take to increase the level of employment? (04)

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Q.17 (a) What is meant by ‘Terms of Trade’? Briefly discuss the factors which affect the terms of trade of a country. (09)
(b) Discuss any four advantages of free international trade. Also discuss four barriers to free international trade. (11)
Q.18 State what is meant by the term Fiscal Policy. Explain how fiscal policy measures May help to stimulate aggregate demand
and reduce unemployment in an economy. (10)
Q.19 (a) Frequent exchange rate variations May not be desirable. However, an absolute rigidity of exchange rates in face of
drastic changes May be equally harmful. Give arguments in favour of floating exchange rates. (03)
(b) Indirect taxes are usually unavoidable and broaden the tax base. Specify the probable advantages and disadvantages
of indirect taxes. (07)
Q.20 (a) Governments often seek to achieve certain objectives by influencing the exchange rates. Identify any three such
objectives.
(b) Governments often follow a policy of deliberately weakening the domestic currency by reducing its parity value
within a fixed rate system. Identify the purpose of following such policy and also discuss the factors upon which
effectiveness of such policy depends.
Q.21 Explain any two limitations of fiscal policy. (04)

Q.22 (a) What is meant by ‘Regressive’, ‘Proportional’ and ‘Progressive’ taxes? Give one example of each of the above types of
taxes in the context of Pakistan. (06)
(b) State any eight characteristics which are important for creating a good system of taxation. (04)
Q.23 Identify four main objectives of fiscal policy and briefly describe how these objectives May be achieved. (04)
(ICAP, CAF 02 Level – Spring 2018)Q.24

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CHAPTER 10: PUBLIC FINANCE
Q.1 What do you understand by capital? On what does the growth of capital in a country depend? (13)
Q.2 (a) What is ‘Deficit Financing’? Is it same as ‘Deficit Budgeting’? (05)

(b) Why do the Governments of developing countries resort to Deficit Financing? (10)
Q.3 The Role of Exports in the National Economy (20)

Q.4 (a) Determine the goals of public expenditure. (05)

(b) What are the factors that hamper the foreign direct investment in Pakistan? (08)
Q.5 Enlist the main contributions of foreign trade towards economic development of a country. (06)
Q.6 What is meant by ‘public debt’? Discuss the important purposes of raising public debt. (05)
Q.7 Explain deficit financing and what effects does it have on the economy of a country. (06)
Q.8 What is meant by public debt and how can the government reduce its size? (04)
Q.9 What is meant by Price Index? Explain any three commonly used price indices. (08)
Q.10 Briefly describe the main functions of ‘Public finance’ as stated by Musgrave. (06)
Q.11 In recent times, public expenditure has increased enormously. Briefly describe any four principal causes of growing
public expenditure of nations. (06)

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CHAPTER 11: MONEY
Q.1 What are the major causes of rising prices in Pakistan? What measures would you suggest to control inflation in the
country? (20)
Q.2 What exactly is meant by Inflation? What are its causes and consequences? Discuss in the context of Pakistan. (20)
Q.3 “Money is a matter of functions four; a medium, a measure, a standard, a store.” Elaborate the statement. Also discuss
money as a measure of transferring value. (20)
Q.4 What are the major causes of rising prices in Pakistan? What measures would you suggest to control inflation in the
country? (16)
Q.5 What are the major causes of inflation in the country at present? What ways would you suggest that will be helpful in
dealing with the problem? (16)
Q.6 What are the causes of present inflation in Pakistan? How is it affecting different sections of society? (16)
Q.7 deleted.
Q.8 Examine the causes of growing inflation in Pakistan. Suggest the measures to control it. (10)
Q.9 Examine the Causes of growing inflation in Pakistan. Suggest the measures to contain it. (10)
Q.10 What is meant by the Liquidity Preference? (02)

Q.11 What are the functions of Money? (03)

Q.12 Define Quantity theory of money.

Q.13 How is the value of money determined? (15)


- The economic role of money
Q.15 Write explanatory note on the quantity theory of money. What assumptions be made to prove its validity? (15)
Q.16 (a) What are the advantages of ‘Paper Money’? (05)

(b) Discuss the Principles of Note issue (10)
Q.17 Define Demand-pull inflation and Cost Push inflation. How can demand-pull inflation be controlled? (05)

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Q.18 Describe the following briefly:

(-) Unemployment and its Consequences
Q.19 Compare and contrast ‘Keynesian’ and ‘Monetarist’ approaches to the demand for money. What are the implications of
the two approaches for government economic policy? (15)
Q.20 Point out the essential attributes of good money. (05)

Q.21 Define the concept of Liquidity Preference. State its motives. (05)
Q.22 Describe the different categories of unemployment and suggest measures to reduce un-employment. (10)
Q.23 (a) What are the non-traditional functions of the State Bank of Pakistan? (06)
(b) Elucidate the advantages of bank money. (06)
Q.24 Explain briefly the process of creation of credit by commercial banks. (08)
Q.25 Describe the functions of money in an economy. (04)

Q.26 (a) What is meant by credit money? (02)

(b) Discuss the advantages and disadvantages of using paper money. (08)
Q.27 (a) Briefly describe at least six causes of inflation. (06)

(b) What measures May be taken to control inflation? (06)
Q.28 Briefly describe the important features of Classical and Keynesian theories of wages and employment.
Q.29 “Inflation represents a situation whereby the pressure of aggregate demand for goods and services exceeds the available
supply of output. This disparity between aggregate demand and aggregate supply May be the result of more than one
cause”
(a) List any ten causes of inflation. (05)
(b) What is a price index? Briefly explain any three commonly used price indices. (08)
Q.30 Explain briefly the concepts of Demand-pull inflation and Cost-push inflation. (04)
Q.31 According to Keynes, individuals have various motives for retaining their money in liquid form. Identify these motives and
explain their influence on the liquidity preference of an individual. (06)
Q.32 (a) Money has been defined by various economists on the basis of its elementary components. Define money using
“Traditional Approach” and “Monetarist Approach”. (04)
(b) Identify and explain briefly the different functions of money. (08)
(c) Describe the effects of inflation on the functions of money. (08)
Q.33 Discuss four advantages and disadvantages of paper money. (08)


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Q.34 (a) What do the terms Demand-pull inflation and Cost-push inflation mean? (04)
(b) Explain the concept of cost-push inflation with the help of demand and supply curves. (08)
Q.35 Briefly discuss four unfavourable effects of inflation. (04)

Q.36 (a) Briefly explain the ‘Quantity Theory of Money’. (03)

(b) Identify three reasons why people prefer to hold money in liquid form. (03)
(c) Discuss how introduction of money has resulted in overcoming the shortcomings of barter system. (04)
Q.37 What is inflation? Briefly state any four harmful effects of inflation on the economy. (05)
Q.38 (a) Identify and describe the functions of money. (04)

(b) Compute the velocity of circulation of money in an economy using the Quantity Theory of Money, where the average
price level is 1.8, real GDP is Rs.28,726 billion and the nominal money supply is Rs.12,926 billion. (02)
Q.39 (a) Briefly explain ‘Liquidity preference theory’. Briefly describe the three motives, identified by Keynes which determine
an individual’s demand for holding money in liquid form. (07)
(b) What is meant by ‘Keynesian liquidity trap’? Identify any two policies which May help in breaking out of the liquidity
trap. (03)

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CHAPTER 12: MONETARY POLICY
Q.1 What is the difference between fiscal and monetary policy and what are the tools of each? Which one of the two is more
successful and commonly used in Pakistan? Give reasons and examples. (16)
Q.2 Pakistan economy is suffering from a huge budgetary deficit. What fiscal and monetary tools are likely to be effective in
narrowing this deficit. (16)
Q.3 Write short note on Objectives of monetary policy. (2.5)

Q.4 Write notes:

(-)Objectives of Monetary Policy (06)

(i)Financial intermediaries (04)
(ii)Role of State Bank of Pakistan (04)
Q.6 Main Objectives of Monetary Policy

Q.7 Discuss the main objectives of monetary policy (05)

Q.8 Explain the term ‘Financial Intermediaries’ and describe their functions. (06)
Q.9 What do you understand by the term ‘fiscal policy’? What are its important objectives? (10)
Q.10 (a) Identify the four important functions of money and highlight their significance. (08)
(b) Keynes has identified three different motives on account of which a person prefers to keep his money in liquid form.
Identify these motives and describe their influence on the liquidity preference of an individual. (06)
(c) What do we mean by ‘Open Market Operations’? Why does the Central Bank undertake such operations? (04)
Q.11 Open Market Operations (06)

Q.12 (a) Describe the four major objectives of a government’s economic policy. (06)
(b) Explain how monetary and fiscal policies can be used to achieve the above objectives. (06)
Q.13 What do you understand by the term “Financial intermediary”? Give example. Briefly describe their role in an economy
with the help of a flow chart. (08)
Q.14 (a) What do you understand by the terms ‘floating exchange rate’ and ‘fixed exchange rate’? List three advantages of each
of the above types of exchange rates. (07)
(b)Identify the reasons why a government May want to influence exchange rate. (03)

Papers
Q.15 State the meaning of ‘Financial Intermediary’. (02)

Q.16 (a) There are various objectives of monetary policy but it is not possible to satisfy all of them simultaneously. Briefly
describe the conflicts that May exist between various objectives of monetary policy. (06)
(b) Monetary policy May bring about many advantages but in the real economy, there are certain limitations to its
effectiveness. Discuss any four such limitations. (04)
Q.17 Illustrate the process through which the central bank May reduce the level of aggregate demand in the economy using
open market operations. (05)

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CHAPTER 13: CREDIT
Q.1 Several changes have taken place in the overall banking sector in Pakistan in the last couple of years or so. Demonstrate
your familiarities with these. (16)
Q.2 Write a note on functions of a commercial bank. (04)
Q.3 Is in your opinion, the commercial banks in Pakistan have played their role in the economic development of the country

(a) Functions of commercial banks
(b) Sources of credit for business
Q.5 Discuss the role of commercial banks in the economic development of Pakistan. (10)
Q.6 Define a Commercial Bank and state its main functions. (10)
Q.7 (a) Briefly describe three aims of commercial banks. (05)

(b) Discuss the concept of Capital Adequacy in context of commercial banks. (03)
Q.8 (a) Describe the quantitative method of credit control adopted by the central bank to control credit (04)
(b) Briefly discuss the role of State Bank of Pakistan (SBP) as Bankers’ Bank. (03)
Q.9 What are the chief methods of lending available to commercial banks? (04)
Q.10 Discuss the weapons available with a Central Bank to control a persistent inflationary situation. (10)
Q.11 (a) How does State Bank act as a lender of the last resort? (04)
(b) Briefly state the role of State Bank as ‘Controller of Credit’. (05)
Q.12 Commercial banks are primarily involved in deposit taking and providing loans to customers. Identify at least ten other
functions performed by them. (05)
Q.13 Describe the process of credit creation by commercial banks and the concept of credit multiplier with the help of an
example. (10)
Q.14 Describe the measures that are available to a central bank for restricting credit creation ability of commercial banks. How
such measures affect the process of credit creation? (08)
Q.15 Various sources of short-term and long-term credit are available to the firms. Briefly discuss any two sources in each case.

Paper
Q.16 (a) An important objective of a central bank is to reduce inflation. Briefly describe how the central bank uses money
market operations to achieve this objective. (03)
(b) What role does a central bank play for a government? (07)
Q.17 (a) List any four functions of a central bank. (02)

(b) Explain how the central banks are able to reduce the level of aggregate demand in an economy by changing the
reserve requirements of commercial banks? (08)
Q.18 (a) What is ‘Credit money’? Give two advantages and disadvantages of credit money. (06)
(b) ‘Central bank uses monetary policy to achieve number of objectives in an economy. However, due to conflicting
situations, it is not possible to achieve all of these objectives at once’. Briefly describe any two conflicts which May exist
between these objectives. (04)
Q.19 (a)What do you understand by the term ‘Bank’? Briefly describe the following:
(i) Retail bank
(ii) Specialized bank
(iii) Investment bank (06)
(b) Identify any eight functions of a central bank. (04)


Papers
CHAPTER 14: BALANCE OF PAYMENTS AND TRADE
Q.1 Enumerate the major factors which contribute towards persistent adverse balance of payments of our country, and
suggest some practicable policy measures by which we could improve the situation. (20)
Q.2 What is the difference between balance of trade .and balance of payments? Discuss clearly with special reference to
Pakistan the problems of these two for the economy. (20)
Q.3 Why do countries develop balance of payments problem? Demonstrate your 'familiarity with the concept and nature of
problem of balance of payments. Discuss with special reference to Pakistan. (16)
Q.4 What is the difference between balance of trade and balance of payment? Discuss clearly with special reference to
Pakistan the problems of these two for the economy. (16)
Q.5 Describe the concept of Balance of Payments. What methods are usually adopted for correction of adverse balance of
payments? (10)
Q.6 Describe the concept of Balance of Payments. What methods are usually adopted for the correction of adverse balance of
payments? (10)
Q.7 What is meant by deficit in balance of Payments? What is your opinion are the causes of deficit in Pakistan? (15)
Q.8 What are the main causes of persistent adverse balance of payments of Pakistan? Suggest remedial measures. (16)
Q.9 Analyze briefly, the causes of imbalance in our foreign trade. Is devaluation a solution to this problem? (10)
Q.10 What do you understand by devaluation? Give reasons of repeated devaluation in recent years by Pakistan government.
Also state whether or not the objectives of devaluation have been achieved?
Q.11 Explain in detail:

Main causes of Pakistan’s unfavourable balance of trade
.(ICAP, CAF 02 Level – Spring 1999)
Q.12 What are the major sources of revenue in Pakistan through direct and indirect taxation and how these may be used as a
tool of fiscal policy to reduce the budget deficit in the economy? (10)
Q.13 Account for the phenomenal rise of the Exchange Reserves of Pakistan. (05)
Q.14 Explain the balance of payment system. Give remedies in case there is an adverse balance in the balance of payment
account. (08)
Q.15 Distinguish between ‘Quota’ and ‘Tariff’. (04)


CAF 02 – Introduction to Economics and Finance Practice & Revision Set
Q.16 Why do countries practice protectionism while carrying out international trade? Also mention at least two drawbacks of
protectionism. (06)
Q.17 Balance of payment is divided into three parts i.e. Current Account, Capital Account and Changes in Reserve Assets.
What do you understand by Current Account? Explain how Current Account deficit May be controlled.
Q.18 (a) What is meant by ‘Progressive Taxation’? Please illustrate. (03)

(b) Identify the merits of Progressive Taxation. (04)
Q.19 Briefly describe the principles of ‘Multilateral Trading System’ under the WTO regime? (06)
Q.20 What do you understand by balance of payment and balance of trade? Describe the steps that May be taken if there is an
adverse balance of payment. (09)
Q.21 Describe the main activities of World Trade Organization. (04)

Q.22 What do you understand by “Adverse Balance of Trade”? Briefly describe the steps which are usually taken by the
government to control adverse balance of trade. (08)
Q.23 (a) What do you understand by “Free Trade”. (03)

(b) Briefly describe the main advantages of “Free Trade”. (06)
(c) Discuss the situations where a government May be justified in taking measures which May not be in line with the
policy of “Free Trade”. (06)
Q.24 (a) What is meant by ‘Terms of Trade’? Describe the situations in which the Terms of Trade would rise and fall. (03)
(b) List the main functions of World Trade Organization. (04)
Q.25 (a) What is meant by Indirect Taxes? Give three examples of Indirect Taxes. (02)
(b) Briefly explain the disadvantages of Indirect Taxes. (09)
Q.26 What is meant by Recession? What economic characteristics are most commonly observed during Recessionary periods?
(06)
Q.27 State any four unfavourable consequences of unemployment. (05)

Q.28 (a) List five advantages which countries seek to achieve by pursuing policies of protectionism in international trade. (05)
(b) Explain why countries adopt policies of restriction of imports by quotas rather than by imposition of tariffs. (02)
Q.29 (a) State what is meant by Exchange Rate. List the major factors which influence the long-term movements in the
Exchange Rates. (04)
(b) Describe four factors which are responsible for creating demand for foreign currency in any country. (04)
(c) What is Balance of Payments? What is meant by the term Deficit in the Balance of Payments? (02)
(d) List the main headings under which the various accounts in the Balance of Payments are classified and state the
currency in which the Balance of Payments of Pakistan is recorded. (02)
Q.30 (a) Explain the term Progressive Taxation. State four merits of following a regime of Progressive Taxation. (05)
(b) What are the objectives of World Trade Organisation? (06)

Q.31 Describe the measures a country May take to correct disequilibrium in the Balance of Payments. (07)
Q.32 Explain what is meant by:

(a) Freely Fluctuating Exchange Regime
(b) Fixed Exchange Rate Regime, and
(c) Managed Floating Exchange Rate Regime (06)
Q.33 (a) What do you understand by “Terms of trade”? Explain favourable and unfavourable “Terms of trade” with the help of
an example. (04)
(b) Briefly explain the factors which affect the “Terms of trade” of a country. (06)
Q.34 (a) What is meant by the term “Trade Deficit”? Briefly describe the key measures a government May undertake to control
the deficit on the country’s balance of trade. (08)
(b) Explain briefly different classes of taxes with the help of a diagram. (06)
(c) Give any one advantage and disadvantage of each of the above class of taxes. (06)
Q.35 What is meant by Direct and Indirect taxes? Enumerate the features of a good tax system. (08)
Q.36 (a) Describe the objectives of World Trade Organization. (06)

(b) Explain with the help of a diagram, the shutdown point of a firm under perfect competition. (06)
Q.37 (a) Briefly describe the main causes of disequilibrium in the balance of payments. (07)
(b) State the measures for rectifying disequilibrium in the balance of payments. (07)
(c) Briefly describe three types of exchange rate polices which governments usually adopt for determination of exchange
rate. (06)
Q.38 What is “Free Trade”? Briefly describe its main advantages. (10)
Q.39 (a) Briefly explain progressive and proportional taxation by giving one practical example of each. State any one merit and
one demerit of progressive and proportional taxation. (09)
(b) What is meant by Direct and Indirect taxes? Briefly discuss the features of a good tax system. (08)
(c) How does indirect taxation help to promote economic development of a country? (03)
Q.40 (a) Explain what is meant by the term ‘balance of payments deficit’. (03)
(b) Discuss the difference between ‘financing’ a balance of payments deficit and ‘correcting’ that deficit. (07)
Q.41 What is meant by the term ‘Recession’? What economic characteristics are commonly observed during recessionary
periods? (06)
Q.42 (a) What is meant by ‘direct taxation’ and ‘indirect taxation’? Give two examples of each type of taxation. (04)
(b) State any three advantages and three disadvantages of direct and indirect taxation. (06)
Q.43 (a) Briefly discuss five main causes of disequilibrium in the balance of payments. (05)
(b) State and briefly describe the impact of any five measures that a government May take to rectify the disequilibrium in
the balance of payments. (05)

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Q.44 What do you understand by ‘J curve’? Explain with the help of a ‘J curve’, how in the short-run the current account deficit
May get worse before improving. (10)
Q.45 (a)Briefly explain ‘Balance of payment’, ‘Balance of trade’ and ‘Terms of trade’. (06)
(b) Describe any four corrective measures which May be adopted to improve the balance of payment position in Pakistan.
(04)
(c) The current account, the capital account and the financial account make up country’s balance of payments. Briefly
describe the components of the financial account. (04)
Q.46 (a)What is meant by ‘Exchange rate’? Briefly describe the impact of fall in exchange rate on a country’s exports and
imports. (04)
(b) Illustrate with the help of a diagram, how the government May stop exchange rate from falling. (06)

Chp-wise & Revision
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CHAPTER 15: FINANCIAL MARKETS
Q.1 Define Deficit Financing and briefly describe its consequences. (10)
Q.2 Give a resume of the important Development Financial Institutes (DFIS) present in Pakistan. (05)

(a) Capital Markets
(b) Mutual Funds
Q.4 Differentiate between the following:

(a) Money Market and Capital Market (05)
(b) Open-End Mutual Fund and Close-End Mutual Fund (05)
Q.5 Write notes on any three Institutions of Capital Market. (10)

Q.6 (a) Explain four differences between a ‘share’ and a ‘debenture’. (03)
(b) Describe the instruments of Capital market. (05)
Q.7 What is money market? Describe the institutions and instruments of money market. (11)
Q.8 (a) Highlight the role played by the Money Market in the development of a country. (05)
(b) Explain the reasons for the present boom prevailing in the Stock Markets of Pakistan. (05)
Q.9 (a) Give a brief overview of Financial Institutions functioning in the country. (07)
(b) Analyse the components of Monetary Assets in Pakistan. (05)
Q.10 Enumerate any five constituents of Capital Markets of Pakistan. (05)

Q.11 What are the main functions of Money Market? Give a list of any three institutions of Money Market. (04)
Q.12 (a)What is a mutual fund? What is the main difference between open-end and closed end mutual funds? (04)
(b) Describe the main advantages of investing through mutual funds. (02)
(c) Discuss at least four types of mutual funds differentiating them on the basis of their investment objectives. (06)
Q.13 (a) What is meant by Financial Intermediation? (02)

(b) Give reasons why commercial banks strive hard to maintain adequate liquidity at all times. (02)
Q.14 (a) Briefly explain the term Capital Market. (02)

(b) State the important role which an active stock exchange plays in the functioning of a country’s economy. (04)
(c) Identify eight factors which May be responsible for fluctuations in the prices of a company’s shares on the stock
exchange. (04)

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Q.15 (a) Distinguish between ‘Money Market’ and ‘Capital Market’. Identify any three institutions which operate in each
market. (06)
(b) Identify any two capital market instruments that are available to the government for financing its expenditure. What
factors the government should consider before raising finances through these instruments? (04)
Q.16 What do you understand by the term ‘Derivative’? List different ways in which derivatives are traded. (03)
Q.17 (a) Balance of payments is a combination of current account and capital/financial account. Briefly discuss the components
of:
current account
capital/financial account (08)
(b) List the ways through which government can promote the exports of a country in the short-term. (02)
Q.18 (a) Define capital market and list any four types of organizations that operate in the capital market. (04)
(b) If a government wishes to raise money through the capital market, explain the choice of instruments that are available
to it. Also state what matters it would consider while raising the money through capital market. (06)
Q.19 (a) Define ‘Money market’. Briefly describe any two marketable instruments traded on money markets. (04)
(b) Identify and describe the functions of money. (04)
(c) Compute the velocity of circulation of money in an economy using the Quantity Theory of Money, where the average
price level is 1.8, real GDP is Rs.28,726 billion and the nominal money supply is Rs.12,926 billion. (02)
Q.20 (a) What is a capital market? State its main objectives. (03)
(b) What do you understand by the term ‘Derivatives’? State the main objective of exchange traded derivatives. (03)

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CAF 02 – Introduction to Economics and Finance Practice &

CHAPTER 1: FUNDAMENTALS OF ECONOMICS

Q.9 Write notes:

Q.10 Mixed Economy (9 minutes)

Q.11 Write short note on Mixed Economy. (Marks 2.5)

Q.15 Write notes:

Q.17 Write notes:

Q.18 Write Notes:

Q.20 Write notes:

Q.22 Give the precise answers of the following:

Q.25 Write short note on Opportunity cost. (Marks-5)

Q.26 What do you mean by ‘economic system’?

Q.29 Explain and illustrate the production possibility frontier.

Q.32 Describe the following briefly:

RISE School of Accountancy

Q.38 Enumerate the merits and demerits of Market Economy. (10)

Q.39 Highlight the salient features of Mixed Economy. (08)

Q.40 Define opportunity cost. (03)

Q.41 Briefly describe the merits and demerits of capitalism. (07)

Q.42 What is meant by division of labour?

Q.48 Describe the term ‘Land’ as a factor of production.

Q.54 What do you understand by the term Division of Labour?

Regards:Awais Ali Page 3

Q.67 Explain the role of State in a mixed economy. (08)

Regards:Awais Ali Page 4

CHAPTER 2: MICROECONOMICS-DEMAND AND SUPPLY

Q.2 What are the basic laws of Demand and Supply?

Q.4 What is law of Demand? What are the determinants of Demand?

Q.6 Give short answers of the following:

Q.7 (a) Explain the law of Demand.

Q.8 Describe ‘Substitutes’ and ‘Complementary Goods’. (03)

Regards:Awais Ali Page 5

RISE School of Accountancy

CHAPTER 3: DEMAND AND SUPPLY: ELASTICITIES

Q.4 Write short note on Equilibrium price.

(d) What does unit elasticity of demand signify? (02)

RISE School of Accountancy

(b) Briefly describe when Demand for a product is considered to be:

Q.16 Briefly explain the following:

RISE School of Accountancy

For each of the above cases, you are required to:

RISE School of Accountancy

CHAPTER 4:UTILITY ANALYSIS

Q.2 Give short answers of the following:

Q.8 Write short note on the Income Effect.

Q.9 Write short noted on Substitution Effect.

Q.14 Write short note on Consumer surplus.

Q.15 Write short note on Indifference curve analysis. (05)

Regards:Awais Ali Page 10

Q.18 Analyse the Marginal Utility approach to consumer behaviour. (05)

Q.29 Discuss practical importance of law of equi-marginal utility. (07)

Q.30 (a) Describe the Law of Diminishing Marginal Utility. (03)

Regards:Awais Ali Page 11

Regards:Awais Ali Page 12

CHAPTER 5: COSTS, REVENUES AND FIRMS

Q.2 Write Notes:

Q.5 Identify and briefly discuss various factors of production. (20)

Regards:Awais Ali Page 13

Q.17 Write Notes:

Q.20 Write Notes:

Q.23 Write notes:

Q.25 Write a short note on Monopolistic competition. (05)

Q.26 Write Notes: