QUESTION BANK

TOPIC-WISE CA PAST PAPERS (SPR.94-AUT.11)

Abbreviations used
A for Autumn Q for Question
S for Spring M for Marks

1 BASIC ECONOMIC CONCEPTS

Q.1 Explain and illustrate the production possibility curve. [S.00, Q4, M.10]
Q.2 Describe the following briefly:
(a) Human Capital
(b) Concept of Scarcity
(c) Opportunity Cost [A.01, Q4, M.03,03,04]
Q.3 Define and explain (by giving appropriate examples) the concept of ‘opportunity cost’ [A.03, Q.1a, M.05]
Q.4 Explain the relationship among production, consumption and capital formation. [A.03, Q.1b, M.05]
Q.5 Differentiate Sunk Capital and Floating Capital. [S.03, Q.4b, M.02]
Q.6 Distinguish between Microeconomics and Macroeconomics and elaborate their respective fields of study.
[S.04, Q.1, M.10]
Q.7 Define opportunity cost. [S.05, Q.3a, M.03]
Q.8 Explain the term ‘opportunity cost’ with the help of an example. [A.07, Q.6b, M.04]
Q.9 Highlight the main differences between microeconomics and macroeconomics. [A.08, Q.1, M.06]
Q.10 Differentiate between Direct demand and Derived demand. [S.08, Q.7a, M.04]
Q.11 Briefly explain Macroeconomics [A.09, Q.11c, M.1.5]
Q.12 Briefly explain Laissez Faire [S.10, Q.10b, M.02]
Q.13 Draw and briefly explain the “Production Possibility Curve”. [S.11, Q.1, M.07]
Q.14 What is economic wealth? What attributes the goods must possess to be considered as wealth? Identify the classes of ownership of
wealth and give four examples of each. [A.12, Q.01, M.08]
Q.15 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 [S.13, Q.1b, M.03]

2 ECONOMIC SYSTEMS
Q.1 Describe basic problems of different economies .How are they solved in a capitalistic economy.
[S.94, Q.3, M.10]
Q.2 With reference to the experience of Pakistan, discuss the merits and demerits of ‘mixed economy’.
[S.99, Q.6 , M.15]
Q.3 Compare the working of market and planned economy. [A.99, Q.1, M.15]
Q.4 Describe the main features of ‘mixed economy’ with special reference to Pakistan.
[S.00, Q1, M.10]
Q.5 “Pakistan’s economy may be classified as a market economy”. Explain the statement with reference to the
characteristics of market and controlled economy. [A.00, Q1, M.10]
Q.6 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. [S.01, Q3a, M.05]

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 QUESTION BANK
Q.7 In Market Economy, the price mechanism solves the central problem of economy. Discuss.
[S.02, Q2a, M.10]
Q.8 Enumerate the main characteristics of the Market Economy and the Planned Economy. [A.02, Q1, M.10]
Q.9 Discuss the main characteristics of an underdeveloped economy. [S.03, Q.1a, M.10]
Q.10 Enumerate the merits and demerits of Market Economy. [A.04, Q.1, M10]
Q.11 Highlight the salient features of Mixed Economy. [S.05, Q.1, M.08]
Q.12 Briefly analyze the role of ‘Economic Policy’ in a free economy. [A.05,Q .8, M.06]

Q.13 Briefly describe the merits and demerits of capitalism. [S.06, Q.1, M.07]
Q.14 What do you understand by the term ‘market mechanism’? How does it solve the basic economic
problems? [A.06, Q.12, M07,]
Q.15 Explain the role of the ‘state’ in a mixed economy. Illustrate with examples. [S.07, Q.7, M.08]
Q.16 Identify the advantages of socialistic economy as opposed to capitalism. [A.07, Q.6a, M.05]
Q.17 Explain the role of State in a mixed economy. [S.08, Q.1b, M.08]
Q.18 Identify five features of an economic system based on capitalism. [A.10, Q.2c, M.05]
Q.19 (a) What do you understand by the concept of “Consumer Sovereignty”?
(b) Briefly describe the demerits of Free Market Economy. [A.11, Q.1a,b. M.02,07]
Q.20 What is “Market mechanism”? Explain how it resolves the basic economic problems? [S.13, Q.1A, M.07]

3 DEMAND
Q.1 What is the usual shape of demand curve and why? [S.97, Q1d, M.03]
Q.2 Explain the law of demand. What is its relation to the principle of diminishing utility? [S.98, Q2, M.10]
Q.3 What do you mean by demand? Discuss the law of demand. [A.99, Q4, M.10]
Q.4 Explain why the following would lead to an inward or outward shift in the aggregate demand curve:
(i) a rise in price of substitute of a good;
(ii) a fall in price of a complimentary good;
(iii) a fall in the income of the consumers;
(iv) changes in tastes; and
(v) rise in population. [A.00, Q2, M.15]
Q.5 How would the demand for Article A change when the price of Article B goes up:
(i) When A and B are complements
(ii) When A and B are substitutes
In answering parts (a) and (b) give appropriate examples of complements and substitutes. [A.03, Q.2,
M.08]
Q.6 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. [A.06, Q.10, M06,]
Q.7 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. [A.07, Q.7, M.08]

Q.8 Explain any four factors on account of which the demand of a product may change even when its price
remains the same. [S.08, Q.1a, M.06]
Q.9 Differentiate between substitute goods, complimentary goods and independent goods. give two examples
of each. [S.09, Q.6, M.06]
Q.10 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.

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 QUESTION BANK
[A.09, Q.1, M.09]
Q11 Describe consumption goods and state the main determinants of demand for these goods.
[S.10, Q1a, M.02]
Q.12 Describe and differentiate between the concepts of “Change in quantity demanded” and “Change in demand”. Draw diagrams in
support of your answer. [S.13, Q2a, M.10]
Q.13 Briefly explain the following: (i) Income elasticity of demand , (ii) Cross price elasticity of demand [S.13, Q2b, M.10]

4 SUPPLY
Q.1 Elaborate the relationship between supply and time with the help of diagram. [S.06, Q.2, M.06]
Q.2 Briefly describe the factors that are mainly responsible for determining the quantum of supply in the
market. [S.07, Q.3, M.09]
Q.3 According to the law of demand, supply of a product increases when the price increases.
Briefly describe the other factors that affect the quantum of supply of a product. [A.08, Q.8, M.09]
Q.4 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? [S.07, Q.6, M.07]
Q.5 What is a reserve price? Describe the factors which govern the reserve price of a seller. [S.12, Q.3a, M.07]

5 PRICE MECHANISM
Q.1 With the help of schedule and diagram, explain the determination of price in a market economy.
[S.95, Q2, M.10]
Q.2 Define a market and enlist the factors, which determine its extent. [S.04, Q.3a, M.05]
Q.3 A market is a mechanism through which buyers and sellers interact for exchange of goods
and services. Briefly describe the factors which determine the size of the market.
[A.06, Q.6, M06,]
Q.4 What is meant by Price Ceiling and Price Floor? Give one example in each case. [A.09, Q.6b, M.05]
Q.5 Briefly explain Consumer Surplus [S.09, Q.11a, M.1.5]

6 ELASTICITY OF DEMAND & SUPPLY

Q.1 What is meant by price elasticity of demand? How is it measured? Use diagrams. [A.94, Q7, M.10]
Q.2 (a) What do you understand by:
(i) income elasticity of demand, and
(ii) cross elasticity of demand.
(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.
(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.
(d) What does unit elasticity of demand signify? [S.01, Q1, M.04,05,05,02]
Q.3 Identify the factors which determine the elasticity of Demand of Normal Goods, [S.03, Q.3a, M.05]
Q.4 Bring out the significance of Price Elasticity of Demand for individual as well as for the state.
[S.03, Q.6a, M.05]
Q.5 What are the factors that affect the price elasticity of demand? [A.05, Q.1, M.09]
Q.6 Explain the term “price elasticity of demand”. Briefly describe the factors that affect the price elasticity of
demand. [A.08, Q.2, M.07]
Q.7 (a) What is meant by Elasticity of Demand? List and explain briefly the factors which determine the
Elasticity of Demand of a product. [A.09, Q.2a, M.07]
(b) Briefly describe when Demand for a product is considered to be:
 Highly Elastic
 Unit Elastic
 Relatively Inelastic [A.09, Q.2b, M.03]

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 QUESTION BANK
Q.8 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.
[S.10, Q.1c, M.04]
Q.9 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. [A.10, Q.4, M.12]
Q.10 (a) What is meant by “Competitive goods” and “Complementary goods”? Give two examples of
each.
(b) Explain briefly the factors which determine the Price Elasticity of Demand.
(c) 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) [A.11, Q.2, M.04,06, 06]

7 UTILITY ANALYSIS
Q.1 Analyse the marginal utility approach of consumer behaviour. [S.02, Q2-b, M.05]

Q.2 What do you understand by the law of diminishing marginal utility and what are the limitations of the law of
diminishing marginal utility? [S.05, Q.3b, M.05]
Q.3 Describe ‘Substitutes’ and ‘Complementary Goods’ with reference to marginal utility. [A.05, Q.4b, M.03]
Q.4 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 [A.07, Q.1a, M.04]
Q.5 Briefly explain, with the help of a suitable example, how law of equi-marginal utility operates.
[A.07, Q.1b, M.07]
Q.6 Discuss practical importance of law of equi-marginal utility. [S.09, Q5, M.07]
Q.7 Describe the Law of Diminishing Marginal Utility. [S.10, Q.7a, M.03]
Q.8 (a) Briefly explain the Law of Equi-Marginal Utility. Also narrate the basic assumptions
applicable to the Law of Equi-Marginal Utility. [S.12,Q.2a, M.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. [S.12,Q.2b, M.06]
(c) Describe the limitations of the Law of Diminishing Marginal Utility. [S.12,Q.2c, M.05]

8 INDIFFERENCE CURVES
Q.1 Write short note on income effect. [A.94, Q11-i, M.2.5]
Q.2 Write short note on substitution effect. [S.95, Q3-i, M.05]
Q.3 What is meant by consumer’s equilibrium? Elucidate the concept with the help of indifference curve.
[S.96, Q7, M.10]
Q.4 What is meant by budget line. [S.97, Q1-c, M.03]
Q.5 Why are indifference curves convex to the origin? [A.96, Q5-c, M.02]
Q.6 Write short note on the indifference curve analysis. [A.98, Q1-ii, M.05]
Q.7 “Two indifference curves on a single indifference map never intersect each other”. Comment with the help
of a diagram. [S.01, Q3-b, M.06]

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 QUESTION BANK
Q.8 (a) State five assumptions on which the analysis of Consumer’s equilibrium is based.
(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?
(c) In context of consumer’s equilibrium, explain the effect of a change in income when the goods
being used are ‘inferior’. [A.01, Q8, M.5,12,03]
Q.9 (a) How marginal utility theory of consumer demand differs from Indifference curve theory?
(b) Explain how indifference and budget line apparatus are used to derive a consumer demand
curve.For a demand curve certain things are held constant, what are they? [A.02, Q3a,b, M.03,12]
Q.10 Define indifference Curve. State its three main properties. [A.04, Q.2, M.08]
Q.11 (a) Explain why indifference curves for economic goods are negatively sloped? [S.05, Q.2a, M.04]
(b) What is the implication of a positively sloped indifference curve? [S.05, Q.2b, M.03]
(c) Diagrammatically show the income and substitution effect of a price increase for a Normal
good. [S.05, Q.2c, M.03]
Q.12 (a) Briefly explain the term ‘marginal rate of substitution’ with the help of a table.
(b) Why does marginal rate of substitution diminish? [A.06, Q1a,.b, M04,03,]
Q.13 Describe the consumer’s equilibrium using indifference curve approach. [S.07, Q.1, M.10]

Q.14 Explain the following concepts with reference to consumer behaviour, using appropriate diagrams:
 Price effect
 Substitution effect
 Income effect [S.08, Q.5, M.12]
Q.15 (a) Explain the term marginal rate of substitution with the help of an example.
(b) Why does the marginal rate of substitution diminish? [A.08, Q.6a,b. M.04,03]
Q.16 Demonstrate your familiarity with the indifference curve approach to the problem of consumer’s
equilibrium. Support your description by drawing suitable diagram. [S.09, Q4, M.12]

Q.17 (b) When is a consumer in an Equilibrium position? [S.10, Q.7b, M.02]

(c) Narrate the assumptions applicable to the indifference curve approach. [S.10, Q.7c, M.03]

(d) With the help of Indifference Curve show how consumers maximize their levels of satisfaction.
Support your decision by drawing a suitable diagram. [S.10, Q.7d, M.07]
Q.18 (a) Narrate the basic assumptions applicable to the Indifference Curve Approach. [S.11, Q.3a, M.03]
(b) Explain consumer’s equilibrium with the help of a diagram using indifference curves. [S.11, Q.3b, M.09]

Q.19 How do free forces of demand and supply determine equilibrium price and equilibrium quantity? Support your answer with the
help of a diagram. [S.12, Q.3b, M.07]

9 FACTORS OF PRODUCTION
Q.1 Write note on the concept of marginal revenue product. [A.96, Q9-a,M.10]
Q.2 In ideal case of perfect market, factor 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. [S.02, Q3, M.10]
Q.3 What is Marginal Productivity Theory? [S.04, Q.8a, M.05]
Q.4 What do you understand by the term Economic rent [A.04, Q.10i, M.02]

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 QUESTION BANK
Q.5 Identify the factors which influence the mobility of labour. [S.05, Q.5a, M.05]
Q.6 What is meant by division of labour? Explain the different forms of division of labour. [S.06, Q.6, M.06]
Q.7 Land is one of the factors of production. Explain the economic meaning and characteristics of land.
[A.06, Q.5, M05,]
Q.8 State the basic assumptions of the marginal productivity theory. Explain the theory with the help of an
example. [A.07Q.8, M.08]

Q.9 (a) Describe the term ‘Land’ as a factor of production. Explain the basis of determination of ‘Rent’.
(b) Explain the concept of ‘Marginal Efficiency of Capital’. [S.08, Q.6a,b. M.05,05]
Q.10 Briefly explain the factors which influence the efficiency of labour. [A.08, Q.9, M.08]
Q.11 Briefly describe the qualities of a successful entrepreneur. [S.09, Q109, M.07]
Q.12 What is meant by Marginal Physical Product? [A.09, Q.10a, M.02]
Q.13 (a) Explain the pricing of factors of production using the Marginal Productivity Theory. [S.11, Q.6a, M.06]
(b) Briefly explain any four points of criticism over the Marginal Productivity Theory. [S.11, Q.6b, M.06]
Q.14 What do you understand by the term Division of Labour? Briefly describe any four advantages
and disadvantages of Division of Labour. [S.12,Q.1, M.10]
Q.15 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. [A.12, Q.2a, M.11]
Q.16 Briefly explain the factors on which the size of a market depends. [A.12, Q.3b, M.10]
Q.17 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? [S.13, Q.3a, M.10]

10 PRODUCTION, COST & REVENUE

Q.1 Under perfect competition, marginal revenue is the same as price. But under monopoly, marginal revenue
is less than price. Explain. [S.93, Q1, M.15]
Q.2 Explain the law of diminishing return. Discuss its limitations. [A.94, Q3, M.10]
Q.3 Write short note on internal & external economies. [A.94, Q11-ii, M.2.5]
Q.4 Write short note on fixed cost and variable cost. [S.95, Q3-ii, M.2.5]
Q.5 Diminishing return is the result of scarcity of relevant factors of production! Discuss. [S.98, Q2, M.10]
Q.6 What is exactly meant by marginal revenue? [S.99, Q1-b, M.03]
Q.7 What is the law of diminishing return? Does it apply both to agriculture and industry? Explain the rationale
of this law. [S.00, Q5, M.10]
Q.8 (a) Differentiate between Short-Run and Long-Run in relation to Cost.
(b) Describe briefly the Internal and External Economies of Scale. [A.02, Q2, M.5,10]
Q.9 Diminishing return to a single factor of production and constant returns to scale are not inconsistent.
Discuss. [S.03, Q.5b, M.4]
Q.10 The Law of Increasing Returns is also called the Law of Diminishing Cost. Explain with the help of a
schedule. [A.03, Q.4, M.10]
Q.11 Differentiate Explicit cost & implicit cost [S.04, Q.2b, M.05]
Q.12 Why is Short-Run Average Cost Curve (SAC) U-shaped? Explain briefly, also draw diagram of SAC.
[A.04, Q.4, M.10]
Q.13 Explain, with the help of a diagram, the relationship between ‘Marginal’ and ‘Average’ cost of production in
the short run. [A.05, Q.3, M.07]
Q.14 What is meant by ‘Economies of Scale’? Give examples [A.05, Q.5, M.07]
Q.15 Explain the law of diminishing returns giving suitable example and diagram. Underwhat circumstances
does the law operate? [S.06, Q 5, M.09]
Q.16 Describe the merits of small-scale production. [S.07, Q.4, M.06]
Q.17 (a) Explain the reasons because of which firms may come across with diseconomies of scale.

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 QUESTION BANK
(b) Explain, with reasons, the relationship among marginal revenue, average revenue and price
under perfect competition. [A.07, Q.2a,b, M.06,06]
Q.18 Explain the law of increasing returns. How does the law apply in the case of a manufacturing industry?
[A.08, Q.5, M.05]
Q.19 Discuss external economies and diseconomies of scale. [S.09, Q.11, M.06]
Q.20 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) [A.09, Q.10b, M.05]
Q.21 State the Law of Increasing Returns and explain the reasons and factors responsible for operation of the
Law. [S.10, Q1b, M.05]
Q.22 (a) Discuss what is meant by Return to Scale. [A.10, Q.5a, M.03]
(b) Explain briefly the concept of Increasing Return to Scale and Decreasing Return to Scale and indicate
why these different phenomenon occur. [A.10, Q.5b, M.05]
Q.23 Briefly explain the concept of economies and diseconomies of scale. [A.11, Q.3c, M.04]
Q.24 Explain briefly why the short-run average cost curve is “U” shaped. [S.12, Q.3c, M.06]
Q.25 What is meant by “Decreasing returns to scale”? Describe its main causes. [A.12, Q.2b, M.06]

11 MARKET STRUCTURE (PERFECT COMPETITION & MONOPOLY)

Q.1 What do you understand by the equilibrium of the firm? Explain with the help of diagram the short-period
equilibrium position of a competitive firm. [S.95, Q4, M.10]
Q.2 Enumerate the assumptions of the perfect competition. [A.95, Q1-b, M.06]
Q.3 A competitive firm can earn only normal profit in the long-run and its MC=MR=AC=AR=P. Explain &
illustrate. [A.96, Q6, M.10]
Q.4 (a) Draw a labelled diagram of equilibrium of a firm in the long run under perfect competition.
Explanation is not required.
(b) What is “Price Discrimination”? Such discrimination is profitable for the seller under certain
conditions. Please explain. [S.01, Q2a,b. M.6,8]
Q.5 A perfectly competitive firm is in equilibrium when its MC=MR and MC curve cuts MR curve from below.
Explain and illustrate. [S.03, Q.3b, M.10]
Q.6 Differentiate Pure monopoly and Natural monopoly. [S.03, Q.4d, M.02]
Q.7 What is meant by Normal Profit? [S.03, Q.6b, M.5]
Q.8 The perfect Market is only a theoretical concept. Discuss. [A.03, Q.3a, M.05]
Q.9 Bring out economic arguments against the Monopoly. [A.03, Q.3b, M.05]
Q.10 Is the Monopoly-Price always higher than the Competitive-Price? Discuss. [S.05, Q.4, M.09]
Q.11 What are the characteristics of ‘perfectly competitive market’? [A.05, Q.4a, M.05]
Q.12 Explain the shut down point of a firm under perfect competition with the help of a diagram. [A.06, Q.3,
M07,]
Q.13 Elaborate the characteristics of a ‘monopoly’. [S.07, Q.2, M.04]
Q.14 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. [S.07, Q.8, M.10]
Q.15 Explain the concept of ‘Price Discrimination’. Describe the conditions under which a firm can resort to
price discrimination. [S.08, Q.8, M.06]
Q.16 Explain the process of profit-maximization by a monopolist with the help of an appropriate diagram.
[S.08, Q.9, M.08]
Q.17 (a) Briefly describe the important characteristics of a market under perfect competition.
[A.08, Q.3a, M.05]
(b) Explain the equilibrium of a firm under perfect competition, with the help of an appropriate
diagram. [A.08, Q.3b, M.05]
Q.18 Briefly describe the disadvantages of having a monopoly set-up. [S.09, Q.7, M.08]

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 QUESTION BANK
Q.19 (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.
[A.09, Q.3a, M.06]
(b) Explain how a monopolist engaged in price discrimination in different markets would be able to
earn maximum revenues. (Diagram is not required) [A.09, Q.3b, M.05]
Q.20 (a) Explain the term Equilibrium of the Firm. [S.10, Q.3a, M.02]

(b) State the conditions which are essential for the existence of Perfect Competition in a market.
[S.10, Q.3b, M.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. [S.10, Q.3c, M.08]
Q.21 Explain six different features which distinguish a market functioning in an environment of perfect
competition from a market which operates as a monopoly. [A.10, Q.8, M.09]

Q.22 (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. [S.11, Q.2a, M.07]
(b) Explain with the help of an appropriate diagram, the Equilibrium of a Firm under perfect competition, in
the long run. [S.11, Q.2b, M.07]

Q.23 (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. [A.11, Q.3a, M.10]
(b) How a firm can improve its profits by using price discrimination?
(Diagram is not required) [A.11, Q.3b, M.06]
Q.24 Explain with the help of a diagram, the shut down point of a firm under perfect competition . [S.12, Q.6c, M.06]

12 MARKET STRUCTURE (MONOPOLISTIC COMPETITION & OLIGOPOLY)

Q.1 How are prices determined under the conditions of monopolistic or imperfect competition? Discuss with
the help of diagrams. [S.99, Q2, M.10]
Q.2 What are the distinguishing features of perfect and imperfect competition? [A.99, Q2, M.15]
Q.3 What is oligopoly? Mention the features of oligopoly market situation. [S.00, Q2, M.10]
Q.4 Distinguish between a perfectly competitive and an imperfectly competitive market structure of an
economy. [A.00, Q5, M.15]
Q.5 Explain and illustrate the Equilibrium of a Firm under Monopolistic-Competition. [A.01, Q3, M.10]
Q.6 How does oligopoly differs from monopolistic competition? [S.03, Q.5c, M.04]
Q.7 What is meant by Monopolistic-Competition? Enumerate its main Characteristics. [S.04, Q.3b, M.05]
Q.8 Define Oligopoly. Briefly describe its three important characteristics. [A.04, Q.3b, M.05]
Q.9 Describe the different ways in which a product may be differentiated. [S.06, Q.3, M.05]
Q.10 Explain the short and long run equilibrium of a firm under monopolistic competition with the help of
diagrams. [S.06, Q.4, M.10]
Q.11 Explain the meaning of ‘oligopoly’? Describe its economic effects. [A.06, Q.11, M. 05]
Q.12 Briefly explain Price War [A.09, Q.11b, M.1.5]
Q.13 Briefly explain Oligopoly [S.10, Q.10a, M.02]
Q.14 Explain with the help of an appropriate diagram, the price output determination under monopolistic competition in the short-run.
[A.12, Q.3a, M.10]

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 QUESTION BANK
Q.15 What do you understand by the term “Oligopoly”? Briefly explain the economic effects of oligopolistic markets.
[S.13, Q.3b, M.05]

13 NATIONAL INCOME
Q.1 Define the following terms:
(i) gross domestic product.
(ii) gross national product.
(iii) net national product.
(iv) personal income.
(v) disposable personal income. [A.94,Q9, M.10]
Q.2 Define the concept of national income. How is it measured? [S.94,Q.5, M.10]
Q.3 Write short note on ‘significance of national income accounting’. [S.96,Q.9-b, M.10]
Q.4 How national income is measured? Explain with examples. [A.97, Q.2, M.15]
Q.5 What is the difference between GNP& GDP? [S.99, Q1-a3, M.3]
Q.6 Explain the process of national income generation with the help of flow income chart. [A.99, Q.5, M.15]
Q.7 Explain what is national income? How is national income estimated with the help of value added method?
[S.00, Q.3, M.10]
Q.8 The Economic Survey of the government of Aladina discloses the following:
Rupees in millions
Government expenditure 7,500
Sales value of output of firms 30,000
Imports 6,000
Profit before tax of firms 10,500
Consumer’s 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: expenditure approach income
approach value added approach [S.01, Q5, M.5,5,5]
Q.9 Following data relates to the economy of a country over a year period.
Rs. In Millions
Capital consumption 2625
Subsidies 450
Exports 9675
Imports (9360)
Consumer’s expenditure 27600
Taxes on expenditure (4140)
Net property income from abroad 315
Value of physical decrease in stocks (30)
Gross domestic fixed capital formation 7380
General government final consumption 6810
Required:
You are required to compute the following, showing necessary workings:

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 QUESTION BANK
(a) Gross Domestic Product (GDP) at market prices and at factor cost
(b) Gross National Product (GNP) at market prices and at factor cost
(c) National Income at factor cost [S.02, Q.5, M.06,06,03]
Q.10 Differentiate GDP deflator and consumer price index (CPI) [S.03, Q.4a, M.02]
Q.11 (a) Outline the Expenditure approach to measure GDP, GNP, NNP and the National Income.
(b) Describe the utility of computing the national Income. [A.03, Q.8a,b, M.05,05]
Q.12 Enumerate the difficulties in measuring the National Income in the Developing countries.
[S.04, Q.4a, M.10]
Q.13 (a) Define ‘National Income’ and describe the purposes of calculating the same.
(b) Explain with diagram the concept of ‘Circular Flow of Income’. [A.05, Q.10a,b, M.06,08]
Q.14 Briefly narrate the difficulties in the measurement of National Income. [S.07, Q.12, M.08]
Q.15 (a) Briefly describe three different approaches of measuring National Income.
(b) What difficulties are usually faced in measuring National Income? [A.08, Q.7a,b. M.09,09]
Q.16 (a) What do you understand by the term Gross Domestic Product? State the reason for excluding
intermediate goods from the calculations of GDP. [A.09, Q.7a, M.04]
Q.17 (a) Define the term National Income and list the components of National Income under the Income
Method. [S.10, Q.2a, M.03]
(b) Briefly explain the important uses of National Income statistics. [S.10, Q.2b, M.04]
Q.18 Briefly explain Transfer Payments [S.10, Q.10c, M.02]
Q.19 (a) Draw a Diagram of Circular Flow of Income. [A.10, Q.1a, M.04]
(b) Identify and explain briefly the three different types of Withdrawals and Injections from the Circular
Flow of Income. [A.10, Q.1b, M.06]
Q.20 (a) What do you understand by the term National Income? [A.11, Q.6a, M.02]
(b) Explain briefly three different ways of measuring the National Income. [A.11, Q.6b, M.08]
(c) Enumerate the difficulties generally faced in measuring National Income. [A.11, Q.6b, M.08]
Q.21 What do you understand by the terms GDP, GNP and NNP? Briefly describe GDP at market price and GDP at factor cost. [A.12,
Q.5a, M.08]
Q.22 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’ into the Circular Flow. [S.13, Q.7a, M.10]

14 NATIONAL INCOME DETERMINANTS

Q.1 Write short note on the consumption function. [S.95, Q.3-iii, M. 05]
Q.2 What is meant by investment? Describe the factors, which determine the volume of investment in an
economy. [S.95, Q.2, M.10]
Q.3 What is meant by marginal propensity to save? Describe the factors, which determine the rate of national
savings. [A.95, Q.3, M.10]
Q.4 what is the theme of Keynesian economics? [A.96, Q.2-d, M. 02]
Q.5 (a) Identify the main determinants of National Savings.
(b) Define the concept of Investment Multiplier. What determines its size. [S.03, Q.2a,b, M.10,05]
Q.6 Discuss the factors on which capital formation in a country depends. [S.03, Q.5a, M.04]
Q.7 Examine the concept of Effective Demand. [S.04, Q.4b, M.05]
Q.8 Define Investment, Identify the factors which influence private investment. [A.04, Q.7a, M.10]
Q.9 What do you understand by the term Inflationary gap. [A.04, Q.10ii, M.02]
Q.10 Briefly explain the multiplier-accelerator theory. Also give suitable examples. [S.05, Q.5b, M.09]
Q.11 Explain the concepts of Average Propensity to Consume (APC) and Marginal Propensity to Consume
(MPC). [A.05, Q.9, M.06]
Q.12 Describe the factors that affect the level of consumption and savings in an economy. [S.06, Q.7, M.06]
Q.13 Elucidate the meaning and phases of business cycle. [S.06, Q.8, M.07]

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 QUESTION BANK
Q.14 Explain with the help of a diagram, how equilibrium of national income is determined. [A.06, Q.14, M08,]
Q.15 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. [S.07, Q.5, M.07]
Q.16 Explain inflationary and deflationary gaps in the economy using appropriate diagrams. [A.07, Q.3, M.11]
Q.17 There are various factors that influence the inflow of investments in a country. Briefly explain any six such
factors. [A.08, Q.4, M.09]
Q.18 Briefly describe the important features of Classical and Keynesian theories of wages and employment.
[A.08, Q.12, M.06]
Q.19 (a) Explain what do you understand by the term Multiplier. [A.09, Q.5a, M.03]
(b) What are the limitations of the Multiplier? [A.09, Q.5b, M.06]
Q.20 (a) What is meant by Recession? What economic characteristics are most commonly observed
during Recessionary periods? [A.09, Q.9a, M.06]
Q.21 Explain with the help of a diagram using the concepts of Aggregate Demand and Aggregate Supply, how
equilibrium level of national income is achieved. [S.11, Q.7, M.12]
Q.22 Explain briefly the Accelerator Principle. Identify and explain any five limitations of Accelerator Principle. [S.12, Q.6a, M.08]
Q.23 State briefly how a government can influence the level of private investment in the country. [S.12, Q.7a, M.10]
Q.24 Explain by means of a diagram the concept of deflationary gap in the economy. [S.12, Q.7b, M.06]
Q.25 Determinants of consumption function do not change in short run. Explain. [A.12, Q.5b, M.12]

15 MACROECONOMIC GOALS AND GROWTH

Q.1 What should be the economic goals of a country like Pakistan? [S.00, Q.6, M.10]
Q.2 Write explanatory note on Goals of Economic Policy [A.03, Q.7a, M.07]
Q.3 Point out the main objectives of economic growth. State the essential requisites for economic growth.
[S.05, Q.7, M.10]
Q.4 Discuss the factors that have an adverse effect on the economic growth of a country. [S.06, Q.9a, M.06]
Q.5 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.
(b) Briefly discuss the policy tools usually adopted by the government to achieve these objectives.
[S.09, Q.1a,b, M.06,06]
Q.6 Identify and explain briefly the measures which a developing country should take to achieve high levels of
growth in productivity? [A.09, Q.4, M.06]
Q.7 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. [S.10, Q.5a, M.06]
Q.8 (a) How is Economic Growth measured? [A.10, Q.2a, M.01]
(b) List five ingredients which influence a country’s rate of Economic Growth .[A.10, Q.2b, M.05]
Q.9 Describe the four major objectives of a government’s economic policy. [A.12, Q.6a, M.06]

16 UNEMPLOYMENT AND INFLATION

Q.1 Examine the causes of growing inflation in Pakistan. Suggest the measures to contain it.
[A.95, Q.4, M.10]
Q.2 Write a note on Demand-pull & Cost-push inflation. [A.99, Q.7-a,M.4]
Q.3 Define Demand-pull & Cost-push inflation. How can demand-pull inflation be controlled? [A.01, Q.5, M.5]
Q.4 Describe briefly unemployment & its consequences. [S.02, Q.1a, M.5]
Q.5 Describe the different categories of unemployment and suggest measures to reduce un-employment.
[A.04, Q.6, M.10]
Q.6 Briefly describe the various types of unemployment. [S.06, Q.9b, M.04]
Q.7 (a) Briefly describe at least six causes of inflation.

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 QUESTION BANK
(b) What measures may be taken to control inflation? [A.06, Q.2a,b, M06,06,]
Q.8 “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.
(b) What is a price index? Briefly explain any three commonly used price indices.[S.09, Q.1, M.05,08]
Q.9 Briefly describe the various types of unemployment. [S.09, Q.3, M.06]
Q.10 State any four unfavourable consequences of unemployment. [A.09, Q.9b, M.05]
Q.11 Explain briefly the concepts of Demand-pull inflation and Cost-push inflation. [S.10, Q.5b, M.04]
Q.12 What steps are usually adopted by the authorities to control inflationary pressures? [A.10, Q.10, M.06]

Q.13 (a) Explain the relationship between Inflation and Unemployment with the help of a Phillips Curve.
[S.11, Q.4a, M.06]
(b) (i) Full Employment is achieved when the rate of Unemployment reaches zero. Discuss.
(ii) Identify and briefly describe various types of Unemployment. [S.11, Q.4b, M.12]
Q.14 Briefly discuss any four unfavourable consequences of unemployment. [S.12, Q.7c, M.04]

Q.15 (a) What do the terms Demand-pull inflation and Cost-push inflation mean? [S.13, Q.5a, M.04]
(b) Explain the concept of cost-push inflation with the help of demand and supply curves. [S.13, Q.5b, M.08]
(c) What is meant by Price Index? Explain any three commonly used price indices. [S.13, Q.5c, M.08]

17 FISCAL POLICY
Q.1 Does Pakistan has satisfactory resource mobilization? Discuss with particular reference the major sources
of revenue. [S.98, Q.3, M.15]
Q.2 Explain the concept of ‘Zakat’. Discuss its economic significance. [A.94, Q.10, M.10]
Q.3 Write short note on the best system of taxation. [A.94, Q.11-iv, M.2.5]
Q.4 What do you understand by the terms ‘regressive tax’, ‘proportional tax’ and ‘progressive tax’? Explain the
concepts with brief examples. [S.00, Q.7, M.15]
Q.5 What are major sources of revenue in Pakistan through direct & indirect taxation and how these may be
used as a tool of fiscal policy to reduce the budget deficit in the economy? [A.00, Q.6, M.10]
Q.6 (a) What is ‘deficit financing’? Is it same as ‘deficit budgeting’?
(b) Why do the governments of developing countries resort to Deficit Financing?
[A.01, Q.2a,b, M. 05,10]
Q.7 The following data refers to the Federal Budget of Pakistan for the financial year 2001-02:
Receipts Rs. In billions
Revenue receipts
Direct Taxes 150
Indirect Taxes 308
Non tax revenue 139
Surcharges on gas and petroleum 47
Provincial share (190)
Capital receipts (06)
External aid 261
Credit from banking sector 10
Others 33
Total Resources 752
Expenditure
Defence 132
Debt servicing 329
General, Administration, social and other services 81
Others 80
Development Expenditure-Federal 100
Provincial 30
Total Expenditures 752

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 QUESTION BANK
Required: Using your knowledge of economic theory, general economic environment and the above
data, you are required to critically comment on the general health and direction of country’s economy.
[A.01, Q.1, M.15]
Q.8 Important principles of taxation. [S.01, Q.1b,c M.10]
Q.9 Describe main objectives of fiscal policy. [A.02, Q.5-b, M.10,]
Q.10 Differentiate progressive taxation and proportional taxation. [S.03, Q.4c, M.02]
Q.11 Write explanatory note on Merits of Direct Taxes [A.03, Q.7b, M.07]
Q.12 Outline the qualities of a good tax system. [A.04, Q.7b, M.05]
Q.13 What do you understand by the term ‘fiscal policy’? What are its important objectives? [S.05, Q.6, M.10]
Q.14 Determine the goals of public expenditure. [S.05, Q.8a, M.05]
Q.15 What is meant by ‘Indirect Taxes’? Identify major demerits of ‘Indirect Taxes’. [A.05, Q.7, M.07]
Q.16 Identify and briefly explain the characteristics of a good system of taxation. [A.06, Q.7, M09,]
Q.17 What is meant by ‘public debt’? Discuss the important purposes of raising public debt. [A.06, Q.8, M05,]
Q.18 (a) What is meant by ‘Progressive Taxation’? Please illustrate.
(b) Identify the merits of Progressive Taxation. [S.0, 7Q.10a,b, M.03,04]
Q.19 (a) What do you understand by the term ‘fiscal policy’? What are its main objectives?
(b) What fiscal measures does the government take to increase the level of employment?
[A.07, Q.10a,b, M.06,04]
Q.20 Explain deficit financing and what effects does it have on the economy of a country. [A.08, Q.11, M.06]
Q.21 (a) What is meant by Indirect Taxes? Give three examples of Indirect Taxes. [A.09, Q.8a, M.02]
(b) Briefly explain the disadvantages of Indirect Taxes. [A.09, Q.8b, M.09]
Q.22 Explain the term Progressive Taxation. State four merits of following a regime of Progressive Taxation.
[S.10, Q.8a, M.05]
Q.23 What is meant by Public Debt and how can the government reduce the size of the Public Debt?
[A.10, Q.3b, M.03]
Q.24 (b) Explain briefly different classes of taxes with the help of a diagram [A.11, Q.7b, M.06]
(c) Give any one advantage and disadvantage of each of the above class of taxes. [A.11, Q.7c, M.06]
Q.25 What is meant by Direct and Indirect taxes? Enumerate the features of a good tax system. [S.12, Q.8a, M.08]
Q.26 What is meant by public debt and how can the government reduce its size? [S.12, Q.8c, M.04]
Q.27Explain how monetary and fiscal policies can be used to achieve the government economic policy objectives[A12, Q.6.b,M.06]
Q.28 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. [S.13, Q.6B, M.08]
Q.29 Briefly explain the economic problems which a country may face on account of high national debt in relation to its Gross Domestic
Product. [S.13, Q.6C, M.04]

18 MONETARY POLICY
Q.1 Write short note on the objectives of monetary policy. [S.95, Q.3iv, M.2.5]
Q.2 Describe briefly the Main objectives of monetary policy: [S.02, Q.1c, M.05]
Q.3 Discuss the main objectives of monetary policy. [A.03, Q.8c, M.10]

19 INTERNATIONAL TRADE
Q.1 Determine the place of export in the national economy. Identify the bottlenecks, which obstruct the growth
of this sector. [S.95, Q.5, M.10]
Q.2 “Gains of trade is possible when cost ratios are different at home & abroad” comment.
[A.00, Q.7, M.15]
Q.3 Briefly discuss the arguments against the policies of a government to protect the domestic producer.
[S.01, Q.4b, M.12]
Q.4 Explian the role of export in the national economy. [S.02, Q.1d, M.05]

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 QUESTION BANK
Q.5 Write explanatory note on Suggestions to boost Pakistan`s Exports [A.03, Q.7c, M.08]
Q.6 What are the factors that hamper the foreign direct investment in Pakistan? [S.05, Q.8b, M.08]
Q.7 (a) Enlist the main contributions of foreign trade towards economic development of a country.
(b) Identify three (3) major items of exports and imports in the Pakistan economy.
[A.05,Q 2a,b,M06,.03]
Q.8 Distinguish between ‘Quota’ and ‘Tariff’. [A.05, Q.6, M.04]
Q.9 Why do countries practice protectionism while carrying out international trade? Also mention at least two
drawbacks of protectionism. [A.06, Q.4, M06,]
Q.10 Briefly describe the principles of ‘Multilateral Trading System’ under the WTO regime? [S.07Q.13, M.06]
Q.11 Describe the main activities of World Trade Organization. [A.07Q.9, M.04]
Q.12 There are various factors that influence the inflow of investments in a country. Briefly explain any six such
factors. [A.08, Q.4, M.09]
Q.13 (a) What do you understand by “Free Trade”.
(b) Briefly describe the main advantages of “Free Trade”.
(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”. [S.09, Q.9, M.03,06,06]
Q.14 (a) List five advantages which countries seek to achieve by pursuing policies of protectionism in
international trade. [S.10, Q.4a, M.05]
(b) Explain why countries adopt policies of restriction of imports by quotas rather than by imposition
of tariffs. [S.10, Q.4b, M.02]
Q.15 What are the objectives of World Trade Organisation? [S.10, Q.8b, M.06]
Q.16 Describe the objectives of World Trade Organization. [S.12, Q.6b, M.06]
Q.17 What is “Free Trade”? Briefly describe its main advantages. [S.13, Q.7b, M.10]

20 BOP & EXCHANGE RATE

Q.1 Describe the concept of balance of payments. What methods are usually adopted for the correction of
adverse balance of payments? [S.94, Q.11, M.10]
Q.2 What is meant by deficit in balance of payments? What in your opinion are the causes of deficit in
Pakistan? [S.95, Q.5, M.15]
Q.3 Analyze briefly, the causes of imbalance in our foreign trade. Is devaluation a solution of this problem?
[S.96, Q.8, M.10]
Q.4 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.
[A.98, Q.3, M.15]
Q.5 What is meant by deficit in balance of payments? What in your opinion are the causes of deficit in
Pakistan? [S.99, Q.4, M.15]
Q.6 Explain the effect of the ‘devaluation of currency” on the balance of payment –current account of the
country with the help of j-curve. [S.01, Q.4-a, M.07]
Q.7 What is the fundamental difference between the objectives of the International Monetary Fund (IMF) and
the International Bank for Reconstruction and Development (IBRD- also known as World Bank)?
[A..01, Q.7-a, M.05]
Q.8 (a) Distinguish between balance of trade and balance of payment.
(b) What are the factors, which cause adverse balance of payments in Pakistan?
[A.02, Q.4a,b, M. 05,10]
Q.9 Explain the purchasing power parity theory of exchange rate determination. [S.03, Q.1b, M.05]
Q.10 Account for the phenomenal rise of the Exchange Reserves of Pakistan. [S.04, Q.5b, M.05]
Q.11 Explain the balance of payment system. Give remedies in case there is an adverse balance in the balance
of payment account. [A.04, Q.5, M.08]
Q.12 Briefly explain the factors that influence change in foreign exchange rates. [S.06, Q.10b, M.06]

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 QUESTION BANK
Q.13 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. [S.07, Q.9, M.10]
Q.14 (a) Briefly discuss the exchange rate determination under:
(i) purchasing power parity theory; and
(ii) demand and supply theory.
(b) Submit your argument in favour of floating exchange rate policy. [A.07 Q.4a,b, M.08,05]
Q.15 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. [S.08, Q.2, M.09]
Q.16 What is meant by ‘Terms of Trade’? Describe the situations in which the Terms of Trade would rise and
fall.
[A.09, Q.7b, M.03]
Q.17 List the main functions of World Trade Organization. [A.09, Q.7c, M.04]
Q.18 (a) State what is meant by Exchange Rate. List the major factors which influence the long-term
movements in the Exchange Rates. [S.10, Q.6a, M.04]
(b) Describe four factors which are responsible for creating demand for foreign currency in any country.
[S.10, Q.6b, M.04]
(c) What is Balance of Payments? What is meant by the term Deficit in the Balance of Payments?
[S.10, Q.6c, M.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.[S.10,Q.6d, M.02]
Q.19 Briefly explain Structural Adjustment [S.10, Q.10d, M.02]
Q.20 Describe the measures a country may take to correct disequilibrium in the Balance of Payments.
[A.10, Q.6, M.07]
Q.21 Explain what is meant by:
(a) Freely Fluctuating Exchange Regime
(b) Fixed Exchange Rate Regime, and
(c) Managed Floating Exchange Rate Regime. [A.10, Q.9a,b,c M.06]

Q.22 (a) What do you understand by “Terms of trade”? Explain favourable and unfavourable “Terms of trade” with
the help of an example. [S.11, Q.8a, M.04]
(b) Briefly explain the factors which affect the “Terms of trade” of a country. [S.11, Q.8b, M.06]

Q.23 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. [A.11, Q.7a, M.08]
Q.24 Briefly describe the main causes of disequilibrium in the balance of payments. [A.12, Q.7a, M.07]
Q.25 State the measures for rectifying disequilibrium in the balance of payments. [A.12, Q.7b, M.07]
Q.26 Briefly describe three types of exchange rate polices which governments usually adopt for determination of exchange rate.
[A.12, Q.7c, M.06]

21 NATURE, FUNCTIONS AND FORMS OF MONEY

Q.1 Write note on the functions of money. [S..99, Q.1e, M.03]
Q.2 Write note on the economic role of money. [S.00, Q.8-c, M.05]
Q.3 What is “Velocity of circulation of money”? Identify four different functions of money. [S.01, Q.7, M.05]
Q.4 (a) What are the advantages of “Paper Money”?
(b) Discuss the principles of Note issue [S.01, Q.6-ab, M. 05,10]
Q.5 Point out essential attributes of good money. [A..02, Q.6-a, M.05]
Q.6 State briefly the significance and importance of Money. [S.04, Q.6a, M.10]
Q.7 Describe the functions of money in an economy. [A.05, Q.11a, M.04]
Q.8 Discuss the advantages and disadvantages of using paper money. [S.06, Q.11b, M.08]
Q.9 Identify the four important functions of money and highlight their significance. [S.08, Q.4a, M.08]
Q.10 What are the objectives of pursuing and implementing a well-managed currency system?
[A.09, Q.6a, M.04]
Q.11 (a) Money has been defined by various economists on the basis of its elementary components. Define
money using “Tradition Approach” and “Monetarist Approach”. [A.11, Q.5a, M.04]

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 QUESTION BANK
(b) Identify and explain briefly the different functions of money. [A.11, Q.5b, M.08]
(c) Describe the effects of inflation on the functions of money. [A.11, Q.5c, M.08]
Q.12 Discuss four advantages and disadvantages of paper money. [S.12, Q.8b, M.08]

22 DEMAND FOR AND SUPPLY OF MONEY

Q.1 What is meant by the liquidity preference? [A.96, Q.2e, M.02]
Q.2 How is the value of money determined? [A..99, Q.6, M.15]
Q.3 Write explanatory note on the quantity theory of money. What assumptions be made to prove its validity?
[A.00, Q.4, M.15]
Q.4 Compare and contrast ‘Keynesian’ and ‘Monetarist’ approaches to the demand for money. What are the
implications of the two approaches for government economics policy [S.02, Q.4, M.15]
Q.5 Describe monetary rule. [A.02, Q.5-c, M.05]
Q.6 What is Liquidity Trap? [A.02, Q.5-a, M.05]
Q.7 Define the concept of Liquidity Preference. State its motives. [S.04, Q.5a, M.05]
Q.8 Analyses the components of Monetary Assets in Pakistan. [S.04, Q.7b, M.05]
Q.9 The neo-classical theory of interest considers that the rate of interest prevalent in an economy depends on
the supply and demand of loanable funds. Explain the factors that affect the supply and demand of such
funds. [S.08, Q.3, M 15]
Q.10 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.
[S.08, Q.4b, M.06]
Q.11 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. [A.10, Q.7, M.06]

23 BANKING SYSTEM
Q.1 Write notes on financial intermediaries. [A.99, Q.7, M.04]
Q.2 Write notes on the following:
(i) functions of commercial banks.
(ii) sources of credit for business. [S.00, Q.8, M.05,05]
Q.3 Write short note on the real & nominal interest rates. [A..00, Q.3iv, M.03]
Q.4 Elucidate the advantages of bank money. [A.04, Q8b, M.06]
Q.5 Discuss the role of commercial banks in the economic development of Pakistan [A.01, Q.6, M.10]
Q.6 If money (i.e. nominal) rate of interest is 16% and the annual rate of inflation is 5.45%. What is the real
rate of interest? [S.01, Q.7b, M.05]
Q.7 Define a Commercial Bank and state its main functions. [A.02, Q.6-b, M.10]
Q.8 (a) Briefly describe three aims of commercial banks.
(b) Discuss the concept of Capital Adequacy in context to commercial banks. [S.03, Q.8ab, M.05,03]
Q.9 What are the chief methods of lending available to commercial banks? [A.03, Q.5a, M.04]
Q.10 Differentiate Net interest & gross interest [S.04, Q.2c, M.05]
Q.11 Give a brief overview of Financial Institutions functioning in the country. [S.04, Q.7a, M.07]
Q.12 Illustrate and explain the reasons for having different interest rates in the market. [A.04, Q.3a, M.05]
Q.13 Explain briefly the process of creation of credit by commercial banks. [A.04, Q.9a, M.08]
Q.14 Explain the term ‘Financial Intermediaries’ and describe their functions. [A.05, Q.13, M.06]
Q.15 What is meant by credit money? [S.06, Q.11a,, M.02,]
Q.16 Commercial banks are primarily involved in deposit taking and providing loans to customers. Identify at
least ten other functions performed by them. [A.06, Q.9, M05,]

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 QUESTION BANK
Q.17 (a) Elaborate the main factors that affect the general rate of interest in an economy.

(b) Explain the term ‘Real Rate of Interest’ with an example. [S.07Q.11a,b. M.05,03]
Q.18 Describe the process of credit creation by commercial banks with the help of an example.
[A.07Q.5a, M.08]
Q.19 Differentiate between the following with the help of appropriate examples: Net interest and Gross interest.
[S.08, Q.7b, M.04]
Q.20 (a) Describe the main factors that affect the general rate of interest in an economy.
(b) Explain the term “Real Rate Of Interest” with the help of an example. [A.08, Q.10a,b, M.06,03]
Q.21 (a) What is meant by Financial Intermediation? [S.10,Q.9a, M.02]
(b) Give reasons why commercial banks strive hard to maintain adequate liquidity at all times.
[S.10, Q.9b, M.02]
Q.22 What is Nominal Interest Rate? Differentiate between Nominal Interest Rate and Real Interest Rate.
[A.10, Q.3a, M.03]
Q.23 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. [A.12, Q.6C, M.08]
Q.24 Briefly describe the main factors on which general rate of interest depends. [S.13, Q.6a, M.08]

24 MONEY MARKET AND CAPITAL MARKET

Q.1 Write notes on the following:
(a) Capital markets.
(b) Mutual Funds [S.00, Q.8,M. 05,05]
Q.2 Write notes on the following:
(a) Mutual funds.
(b) Securities market. [A.00, Q.3, M.03,02]
Q.3 Differentiate between the following:
(a) money market &capital market
(b) Open-ended mutual fund & closed-ended mutual fund. [S.02, Q.6a,b, M.05,05]
Q.4 Write notes on three Institutions of Capital Market. [A.02, Q.7, M.10]
Q.5 Differentiate Put option and Call option. [S.03, Q.4e, M.02]
Q.6 (a) Explain four differences between a ‘share’ and ‘debenture’.
(b) Describe the instruments of Capital market. [S.03, Q.7ab, M.03,05]
Q.7 What is money market? Describe the institutions and instruments of money Market. [A.03, Q.5b, M.11]
Q.8 (a) Highlight the role played by the Money Market in the development of a country.
(b) Explain the reasons for the present boom prevailing in the Stock Markets of Pakistan.
[A.03, Q.6A,b, M.05,05]
Q.9 Enumerate any five constituents of Capital Markets of Pakistan. [A.04, Q.9b, M.05]
Q.10 List down different types of sources of fund available to a corporate entity and explain any four.
[S.05, Q.9, M.08]
Q.11 Write note on the role of Capital Market in the Economic Development. [S.05, Q.10b, M.05]
Q.12 What are the main functions of Money Market? Give a list of any three institutions of Money Market.
[A.05, Q.11b, M.04]
Q.13 (a) What do you understand by capital market? [S.06, Q.12a, M.03]
(b) Briefly describe the role of capital markets in any country. [S.06, Q.12b, M.03]
(c) Give a brief description of any six instrument of capital market. [S.06, Q.12c, M.06]

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 QUESTION BANK
Q.14 (a) What is a mutual fund? What is the main difference between open-end and closed-end mutual
funds? [A.06, Q.13a, M04,]
(b) Describe the main advantages of investing through mutual funds. [A.06, Q.13b, M02,]
(c) Discuss at least four types of mutual funds differentiating them on the basis of their investment
objectives. [A.06, Q.13c, M06,]

25 STATE BANK OF PAKISTAN

Q.1 Discribe the Role of state bank of Pakistan. [A.99, Q.7, M.04]
Q.2 Briefly discuss the quantitative measures adopted by a central bank to control credit in the economy.
[A.01, Q.7-b, M.10]
Q.3 (a) Describe the quantitative method of credit control adopted by the central bank to control credit.
[S.03, Q.7c, M.04]
(b) Briefly discuss the roll of State Bank of Pakistan as Banker’s Bank. [S.03, Q.7c,d, M.04,03]
Q.4 Why does the Central Bank resort to Open Market Operations? [S.04, Q.6b, M.03]
Q.5 Discuss the weapons available with a Central Bank to control a persistent inflationary situation.
[S.04, Q.8b, M.10]
Q.6 What are the non-traditional function of the State Bank of Pakistan? [A.04, Q.8a, M.06]
Q.7 Write note on the role of State Bank of Pakistan as banker to the Government. [S.05,Q.10a, M.05]
Q.8 (a) How does State Bank act as a lender of the last resort?
(b) Briefly state the role of State Bank as ‘Controller of Credit’. [A.05, Q.12a,b, M04,.05]
Q.9 What are the tools available to the central bank of a country for controlling the supply of money in the
economy? [S.06, Q.10a, M.06]
Q.10 What role does the central bank play in controlling the process of credit creation? [A.07Q.5b, M.06]
Q.11 What do we mean by ‘Open Market Operations’? Why does the Central Bank undertake such operations?
[S.08, Q.4c, M.04]
Q.12 Briefly explain Open Market Operations. [A.09, Q.11d, M.1.5]
Q.13 Identify eight functions which are generally performed by the central bank in a country. [A.10, Q.3c, M.04]

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