Attempt all questions:

Short Questions:
Q#1:
What are the causes of inflation in Pakistan? What steps are
required to bring the situation under control ?
Answer:

Causes of inflation:

 Demand-pull inflation:
Demand-pull inflation is inflation initiated by an increase in aggregate demand.

 Cost-push or supply-side inflation:

Cost-push inflation is inflation caused by an increase in costs.

steps are required to bring the situation under control:

Excessive growth on money supply:

Reduce money supply by cutting down on public sector borrowing.

Funding Govt borrowing from non bank.

Reduce bank lending.

Maintain interest rates.

Expectations of inflation:
Pursue policies which indicates Government determination to reduce inflation.

Q#2:
Write down the difference between Expansionary and Contractionary
fiscal Policy.
Answer:

Expansionary fiscal Policy Contractionary fiscal Policy

Used to combat a recession Use to combat demand pull inflation due to

A decrease in taxes (raises income and
consumption raises by MPC times the
change in income). AD shifts to the right
by a multiple of the change in
consumption.
A combination of increased G spending
and reduced taxes.
An increase in government spending,
which shifts AD to the right by more than
the changes in G due to the multiplier.
excess spending.
An increase In taxes will reduce income and
then consumption at first by the MPC times
the decrease in income and then the
multiplier process leads AD to shift leftward
still further.
A combined G spending decrease and tax
increase could have the same effect with the
right combination.
A decrease in G spending shifts AD back
left, once the multiplier process is complete.
Here price level returns to its pre-inflationary
level, but GDP remains at full-employment
level.

Q#3:
Define Gross Domestic Product in your own words.

Answer:
The total value of all final goods and services produced in an economy within one year
or a specified period of time. The economic growth of a country is measured by the
increase or decrease in GDP. It is used by organizations and governments to direct
economic policies, evaluate development possibilities, and decide what investments to
undertake.

LONG QUESTIONS:
Q#1:

Briefly explain Human development approach.

Answer:

Human development:

Growth and Development:

•Both growth and development refer to changes over a period of time.

Growth:
•Quantities and value neutral change.

•Positive or a negative sign.

Development:

•Qualitative change which is always value positive.

•Development occurs when positive growth takes place.

•For example,if the population of a city grows from one lakh to two lakhs over a
period of time, we say the city has grown.

•However , If facilites like housing, provision of basic servies and other characteristics
remain the same , then this growth has not been accompanied by development.

•The quality of life people enjoy in a country , the oppurtunities they have and freedoms
they enjoy , are important aspects of devlopment

The concept of human development was introduced by Dr. Mahbub-

ul-haq.
• Dr. Haq has described human development as development that enlarges people's
choices and improves their lives.

• Access to resources, health and education are the key areas in human development.

Four pillars of Human Development:

Just as any building is supported by pillars the idea of human development is supported
by the concepts of equity, sustainability, productivity and empowerment.

1 Equity refers to making equal access to opportunities available to everybody.

2. Sustainability means continuity in the availability of opportunities.

3. Productivity here means human labor productivity or productivity in terms of human

work.

4. Empowerment means to have the power to make choices.

Q#2:

How does the green revolution impact/effect the agricultural sector in

Pakistan?

Answer:

Green Revolution:
The Green Revolution in Pakistan, which began in the 1960s and 1970s is the
significant increase in agriculture productivity resulting from the introduction of high yield
varieties of grains use of pesticides and improved management techniques.

Impact/effect of Green Revolution:

The main impact/ of green revolution are as follows:

1.Increase in production:

The use of higher yielding variety seeds, chemical fertilizer, pest and insecticides,
improved irrigation, facilitates etc. has remarkably increased the production of wheat ,
rice , sugarcane ,cotton maize etc. in all the countries of the world including Pakistan.

2. Reducing regional imbalances:

The agricultural scientists are developing new technology which should suit the different
regions of the country. New improved variety of seeds has been developed which suits
the barani farming areas also. The introduction of modern technology in agriculture has
greatly helped in reducing interregional and interregional disparities.

3. Unbalanced cropping pattern:

The green revolution in its coverage of crops is partial and lopsided .In Pakistan the
production of wheat, rice, cotton has remarkably increased due to the adoption of new
technology. However, the production of pulses, grams, maize, barely etc. has recorded
only a ma ginal increase in output.

4.Social imbalances:

In its first phase the green revolution has favored the large land owners. The rich
farmers were and are able to use the package of new technology. They therefore
earned handsome profits from the increased output. In the second phase now, the
peasant proprietors. The difference in income of the large landowners and the small
land owners is, however, significant and socio economic gap is widening as the time
passes.

5. Impact on employment:

Agriculture still is the largest source of unemployment (48% of the total labor force ) in
rural areas. The rural labour force is mainly self-employed and unpaid family helpers still
dominate the employment scene. During the sowing harvesting seasons, the labor force
is nearly absorbed. Sometimes there is also a shortage of labor in peak periods of
agriculture operations. The use of intensive farming methods associated with new
technology has increased the overall employment.

6.Increase in investment :

The farmers benefiting from the new technology are investing more and more of their
increased income for the improvement of land. Purchase of machinery , pesticides and
other inputs. We can say that the farmers are plugging back a major portion of their
income on farm improvements.

7.Economic stability:

The new farm technology has helped in increasing export of agriculture goods,
absorption of rural labor in the manufacturing sector. The rise in net income from the
sector has given stimulus to industrial growth and has helped in promoting economic
stability in the country.