CHAPTER 1

1. In the law of demand, quantity demanded decreases as the price increases, ceteris paribus. Therefore, price
and quantity demanded are positively related.
A. The first and the second statements are both true.
B. The first statement is true. The second statement is false.
C. The first and the second statements are both false.
D. The first statement is false. The second statement is true.

2. Country A produces rice instead of corn because Country A has a comparative advantage in producing rice
over Country B. This situation exemplifies :
A. Economic growth. C. Opportunity cost.
B. Diminishing return. D. Constant return.

3. In explaining the concept of production possibilities, one of the assumptions is that there is full use of
resources, knowledge and technology. This assumption reflects the true situation of a country.
A. The first and the second statements are both true.
B. The first statement is true. The second statement is false.
C. The first and the second statements are both false.
D. The first statement is false. The second statement is true.

4. When consumers predict that the supply of a basic commodity will run out:
A. There will be an outward shift in the demand curve and a decrease in equilibrium price.
B. There will be an inward shift in the demand curve and a decrease in the equilibrium price.
C. There will be an outward shift in the demand curve and an increase in the equilibrium price..
D. There will be an outward shift in the demand curve without any impact on the equilibrium price.

5. When there is an improvement in technology, and assuming that the demand is constant,

A. There will be an increase in the equilibrium quantity of supply and price.

B. There will be an increase in supply, but a decrease in price.
C. There will be a decrease in supply and a decrease in price.
D. There will be an increase in supply without affecting the price.

CHAPTER 2
1. Which of the following are features of economic development?
A. Literacy rate, infrastructure, access to good quality housing.
B. Internet access, academic level and quality healthcare.
C. Shift from agriculture to industry then Service.
D. All of the above.

2. The scope of economic development is broad and it includes which of the following?
A. GDP, GNP and per capita income.
B. GDP, GNP, and income distribution.
C. Improvement in Life expectancy rate, literacy rate, poverty rate, and economic growth.
D. All of the above.
3. It is possible to have economic growth without economic development. Therefore, there could be an increase
in GDP without any actual improvements in in living standard.
A. Both statements are true.
B. Both statements are false.
C. The first statement is true. The second statement is false.
D. The first statement is false. The second statement is true.

4. Which of the following statements characterize the high mass consumption stage of Economic Development?
A. Transition triggered by external influence, interests, and market.
B. Installation of physical infrastructure.
C. Exploitation of comparative advantages in international trade.
D. Development of wider industrial and commercial bases.

5. Possible reasons why increase in GDP may not result to economic development:
A. The rich is getting richer, while the poor is getting poorer.
B. Corruption and bureaucracy in government and traffic congestion.
C. A wide gap between the rich and the poor exists.
D. Low level of literacy rate.

CHAPTER 3

1.Forces reflecting skills upgrade of workforce acquired through training and development.
A. Disembodied Technical Progress. C. Total Factor Productivity.
B. Embodied Technical Progress. D. Multifactor Activity

2. Equation to calculate the steady state of equilibrium for capital-labor ratio of K.

E. Y = 𝐾 1/2 C. SY = dK
F. i = SY. D. SY = (1-S)

3. Equation for finding the steady state of equilibrium for investment.

A. i = C + 1. C. g(Y) = g(k) + g(L).
B. i = SY. D. i = (Y-1) C

4.When stiff restrictions on hiring, compensation, work hours and related rules are enforced, the labor-market
is said to be:
E. Highly flexible. C. Moderately flexible
F. Less flexible. D. Inflexible

5. The importance of sector policies was given emphasis which was among the contributory factors for the Asian
Growth Miracle. Among them was agricultural sector policy implemented by:
A. Reducing tax collection. C. Increasing physical capital investment.
B. Green revolution D. Increasing capital output.

CHAPTER 4

1. It is the term referring to the surge in the financial market caused by speculation regarding a commodity
which results in an explosion of activity in a market segment resulting in vastly over-inflated prices.
A. Fund hedging. C. Currency devaluation.
B Economic overheating. D. Bubble Economy
2. The bubble development was the period when the stock market, real estate and bank credit bubble
developed in the first half of the 90’s. The export sector played a complementary role in the bull market
bubble that developed in Southeast Asia.
A. The first and second statements are true.
B. The first and second statements are false.
C. The first statement is true. The second statement is false. (Financial Sector)
D. The first statement is false. The second statement is true.

3. During the Asian financial crisis, the Thai baht first began to decline in June, 1997, and was followed by
the currency devaluation in Malaysia, Indonesia, and Philippines. The devaluation subsequently spread to
the Australian dollar and Korean Won in the month of October, 1997:
A. The first and second statements are true.
B. The first and second statements are false.
C. The first statement is true. The second statement is false.
D. The first statement is false. The second statement is true.

4. It is a factor in the financial crisis that contributed to the severity of Asian crisis in 1995 whereby foreign
banks and financial institutions were denied to enter the Asian countries:
A. Inadequate fund management system.
B. Nonperforming loans.
C. Ineffective sterilization of capital inflows.
D. Restrictions on foreign banks’ entry

5. There were several reform measures prescribed by the international banks and aid agencies after the Asian
Financial crisis. Some of these reform agenda included debt restructuring and restrictions on foreign
banks’ entry.
A. The first and second statements are true.
B. The first and the second statements are false.
C. The first statement is true. The second statement is false.
D. The first statement is false. The second statement is true.