Federal Public Service Commission (FPSC) Competitive Examination for Recruitment to BPS-17 Posts under the Federal Government
PAPER: ECONOMICS
Time Allowed: 3 Hours
PAPER-I (Objective) 80 Marks
PART-I
Multiple choice Questions. (20)
(ii) Answers given anywhere else, other than the OMR Answer Sheet, will not be considered.
The elasticity of demand for cigarettes by a non-smoker is:
(A) ✓ Unitary price elastic
(B) Relatively price inelastic
(C) Perfectly price elastic
(D) Perfectly price inelastic
Which of the following is not a basic assumption of perfect competition?
(A) Free entry and exit
(B) Many small sellers and buyers
(C) Perfect information
(D) ✓ Homogenous product
________________ is unemployment directly related to swings in the business cycle.
(A) Seasonal
(B) Frictional
(C) ✓ Cyclical
(D) Structural
Which of the following does not apply to Pareto efficiency?
(A) Consumptive efficiency
(B) Productional efficiency
(C) Allocative efficiency
(D) ✓ Equity
The marginal utility of a good refers to the:
(A) Total utility of the good prior to consumption of the last unit
(B) ✓ Extra utility associated with consuming another unit of the good
(C) Utility associated with consuming an alternative good
(D) Consumer surplus associated with the consumption of an alternative good
Disposable income is:
(A) The same as personal income
(B) Income that is used only for consumption
(C) ✓ Personal income remaining after income taxes
(D) Exclusive of social security payments or welfare
A country that makes large net income payments to investors in another country is likely to:
(A) ✓ Have a larger GDP than GNP
(B) Have smaller GDP than GNP
(C) Grow slower economically than the other country
(D) Grow faster economically than the other country
According to Keynes, the relationship between money supply and rate of interest is:
(A) ✓ Negative
(B) Positive
(C) Indirect
(D) None of these
Trade based on absolute advantage was presented by:
(A) Alfred Marshall
(B) ✓ Adam Smith
(C) Lionel Robbins
(D) None of these
The doctrine of comparative advantage says that there are gains from international trade:
(A) Only if both comparative and absolute advantage are present in both countries
(B) If opportunity costs are the same in the countries involved
(C) Only if there are economies of scale available
(D) ✓ If countries specialize in the production of goods in which they are relatively more efficient
The Human Development Index (HDI) ranks all countries on the scale of:
(A) ✓ 0 to 1
(B) 1 to 100
(C) -1 to +1
(D) None of these
Monopolistic Competition is different from Perfect Competition because of:
(A) The large number of firms in the industry
(B) The lack of barriers to the entry and exit of firms
(C) ✓ The differentiation of the product
(D) The lower level of price competition in Monopolistic Competition
The account in the balance of payments that consists of all transactions in financial assets is known as:
(A) ✓ Capital account
(B) Current account
(C) Official Reserve account
(D) None of these
LM curve represents:
(A) Equilibrium in goods market
(B) Budget balance
(C) ✓ Equilibrium in financial market
(D) None of these
Classical economics is the:
(A) ✓ Supply-side economics
(B) Demand-side economics
(C) Both (A) & (B)
(D) None of these
Which of the following is not a component of GDP?
(A) Consumption by households
(B) Investment by firms
(C) Public spending
(D) ✓ Rate of unemployment
The relationship between inflation and unemployment is represented by:
(A) Okun’s law
(B) ✓ Phillips curve
(C) Say’s law
(D) U-shape curve
Increase in the supply of money will positively affect:
(A) ✓ Economic growth of the country
(B) Rate of unemployment
(C) Labour force participation rate
(D) Rate of inflation
Automatic stabilizers are one of the _____________ policy tools.
(A) Monetary
(B) Trade
(C) ✓ Fiscal
(D) Investment
The World Bank classifies countries into four groups. This classification is based upon:
(A) Economic growth rate
(B) Labour force participation rate
(C) Unemployment rate
(D) ✓ Gross National Income per capita
PAPER-I (Subjective) 80 Marks
PART-II
Attempt ONLY FOUR questions from PART-II. (20×4)
Q. No. 2. How can a consumer attain equilibrium under ordinal approach? Also explain the effects of changing income and prices on consumer’s equilibrium in case of normal and inferior commodities. (20)
Q. No. 3. What are the different stages of production? Explain in the light of the law of variable proportions using schedule and diagrams. (20)
Q. No. 4. Explain the circular flow of national income in two-sector, three-sector, and four-sector economy. Discuss the methods by which national income can be measured. Also explain the advantages and shortcomings of each method. (20)
Q. No. 5. Explain the Quantity Theory of Money (QTM) and elaborate the significant ingredients for effective monetary policy to accelerate economic growth in developing countries. (20)
Q. No. 6. Elaborate the different canons of taxation. How can these canons be used optimally? Suggest some policy options to maximize tax revenue in a developing country like Pakistan. (20)
Q. No. 7. Differentiate between economic growth and economic development by discussing traditional and modern measures of growth and development. (20)
Q. No. 8. Write short notes on any FOUR of the following: (5 each)
a. Accelerator Principle
b. Price Discrimination
c. Balance of Payments
d. Human Development Index
e. Public vs. Private Goods (20)
PAPER-II (Objective) 80 Marks
PART-I
Multiple choice Questions. (20)
(ii) Answers given anywhere else, other than the OMR Answer Sheet, will not be considered.
Which economist is associated with the concept of “Development as Freedom”?
(A) Paul Samuelson
(B) ✓ Amartya Sen
(C) Milton Friedman
(D) None of these
Which of the following was a key objective of Pakistan’s land reforms?
(A) Increasing urbanization
(B) Encouraging large-scale industrialization
(C) ✓ Improving agricultural marketing
(D) None of these
A key criticism of Pakistan’s privatization policy is:
(A) Reduced tax revenues
(B) ✓ Lack of transparency and accountability
(C) Over-regulation of privatized sectors
(D) None of these
The Agreement on Agriculture under the WTO primarily affects:
(A) Industrial subsidies
(B) Export regulations
(C) ✓ Domestic support and market access for agriculture
(D) None of these
Which of the following factors is most responsible for Pakistan’s persistent balance of payments crisis?
(A) High reliance on remittances
(B) ✓ Low export diversification and competitiveness
(C) Inadequate foreign direct investment inflows
(D) None of these
The tax-to-GDP ratio in Pakistan has historically remained low due to:
(A) High reliance on indirect taxes
(B) Over-dependence on agriculture
(C) Lack of tax base documentation and enforcement
(D) ✓ All of these
Which of the following is a major constraint on Pakistan’s industrial growth?
(A) Lack of skilled labor
(B) Energy shortages
(C) Weak infrastructure
(D) ✓ All of these
In terms of poverty alleviation, the main challenge for Pakistan has been:
(A) ✓ Ensuring equitable access to resources
(B) Improving microcredit availability
(C) Reducing rural-urban disparities
(D) None of these
The informal economy in Pakistan is estimated to contribute approximately what percentage to GDP?
(A) 10–20%
(B) 30–40%
(C) ✓ 45–55%
(D) None of these
Which of the following is the most significant factor affecting Pakistan’s food security?
(A) Land ownership inequalities
(B) Poor agricultural productivity
(C) ✓ Climate change and water scarcity
(D) None of these
The Chinn-Ito index, often used in research on Pakistan’s economy, measures:
(A) Industrial productivity
(B) ✓ Capital account openness
(C) Exchange rate stability
(D) None of these
Pakistan’s economy is categorized as a:
(A) Low-income developing economy
(B) Upper-middle-income economy
(C) ✓ Lower-middle-income developing economy
(D) None of these
Pakistan’s energy mix is heavily dependent on:
(A) Renewable energy sources
(B) ✓ Imported oil and gas
(C) Nuclear energy
(D) None of these
Water scarcity in Pakistan is primarily caused by:
(A) Mismanagement of water resources
(B) Population growth and urbanization
(C) Climate change impacts
(D) ✓ All of these
The primary reason for inefficiency in Pakistan’s energy sector is:
(A) Overcapacity in energy generation
(B) ✓ Transmission and distribution losses
(C) High energy tariffs
(D) None of these
Which of the following best explains Pakistan’s rising public debt burden in recent years?
(A) High interest rates on domestic borrowing
(B) Excessive reliance on concessional foreign loans
(C) Continuous primary deficits and depreciation of the Rupee
(D) ✓ All of these
A major implication of exchange rate misalignment in Pakistan has been:
(A) Rising export competitiveness and FDI inflows
(B) Improved remittance inflows
(C) Reduction in external debt burden
(D) ✓ None of these
Which of the following is a major criticism of foreign aid to Pakistan?
(A) Aid dependency discourages economic reforms
(B) It increases corruption and political instability
(C) Most aid is spent on non-productive sectors
(D) ✓ All of these
Foreign aid programs, such as the Kerry-Lugar-Berman Act, were designed to:
(A) Promote military cooperation between the US and Pakistan
(B) ✓ Support development in Pakistan’s education and energy sectors
(C) Increase Pakistan’s export potential in global markets
(D) None of these
Which SDG is particularly challenging for Pakistan, given its energy mix and economic structure?
(A) SDG 7: Affordable and Clean Energy
(B) SDG 13: Climate Action
(C) SDG 8: Decent Work and Economic Growth
(D) ✓ All of these
PAPER-II (Subjective) 80 Marks
PART-II
Attempt ONLY FOUR questions from PART-II. (20×4)
Q. No. 2. Critically evaluate why Pakistan’s economic growth has been inconsistent over the decades. How do political stability and governance quality influence long-term growth prospects? (20)
Q. No. 3. “Pakistan’s industrial policy has favored protectionism over competitiveness.” Critically analyze this statement with examples from key industries. (20)
Q. No. 4. “Rising public debt in Pakistan is more a symptom of weak fiscal management than economic necessity.” Discuss this statement critically. (20)
Q. No. 5. Discuss the role of exchange rate policy in stabilizing Pakistan’s economy. What are the trade-offs involved? (20)
Q. No. 6. “Land reforms in Pakistan have been more symbolic than substantive.” Critically examine this statement, with reference to their design, implementation, and outcomes. (20)
Q. No. 7. Pakistan’s energy crisis is often termed as a governance failure rather than a resource issue. Critically evaluate this perspective. (20)
Q. No. 8. Write notes on any TWO of the following (with reference to Pakistan): (10 each)
