1.

The problem facing insurers that risky types are likely to accept an insurance policy and more
expensive to serve is expressed by one of the following concept?

a. Adverse selection
b. Auction
c. Market signaling
d. Moral Hazard

2.Monetary policy has much shorter inside lag than fiscal policy because,

a. A central bank can decide on and implement a policy change in longer time

b. A central bank can decide on and implement a policy change in less than a day

c. fiscal authorities can decide on and implement a policy change faster than central bank

d. fiscal authorities can decide on and implement a policy change in shorter time

3.The measure of a change in the national income due to a one birr change in any of the expenditure
is known as…………

a. Average propensity to consume

b. Elasticity

c. Marginal propensity to consume

d. Multiplier

4. Which one of the following is not common for UNIDO and L-M approaches to economic valuation
of project?

a. Both involve the use of discounted cash flow analysis

b. Both measures costs and benefits in terms of domestic birr

c. Both involve consideration of factor of equity

d. Both involve the calculation of shadow price

5. Suppose the two input and single output production function is given as Q= 8KL^3/2-2K^1/2L^2,
where capital (K) is fixed at 4 units. What is the level of labor employment at which the law of
diminishing returns begins to operate?

a. 36

b. 16

c. 24

d. 9

6. which one of the following s incorrect about the limitation of using GDP as an index of welfare of
a country?

a. it does not have any room for correction for quality improvement
b. GDP omits non marketable goods and services

c. Inclusion of Unpaid household activities

d. It does not account for bads such as crime and pollution

7. A stage that begins immediately after the final decision on the project and ends when starts
rendering the benefits envisaged is……………….?

a. identification

b. feasibility

c. selection

d. implementation

8. According to elasticity approach to balance of payments,

a. If the sum of export elasticity and import elasticity is equal to 1, then devaluation can improve
balance of payment

b. If the sum of export elasticity and import elasticity is greater than 1, then devaluation can
improve balance of payment

c. If the sum of export elasticity and import elasticity is greater than 1, then devaluation leaves
balance of payment as was

d. If the sum of export elasticity and import elasticity is less than 1, then devaluation can improve
balance of payment

9. A stationary series can be defined as one with

O a. a constant mean, variable variance and constant autocovariances for each given lag

O b. a constant mean, constant variance and variable autocovariances for each given lag

O c. a constant mean, constant variance and constant autocovariances for each given lag

O d. Variable mean, constant variance and constant autocovariances for each given lag

10. Developing countries participation in international trade is marked by primary-product export

dependence; which one of the following is not among the development consequence of such
dependence? It,

O a. Carries with it a degree of risk and uncertainty although long-term trend for prices of primary
goods is generally upward and less volatile

b. Carries with it a degree of risk and uncertainty as the long-term trend for prices of primary goods
is downward, as we as very volatile

C.A sudden loss of income from exports can be devastating

D Specialization in production frequently has brought with it substantial, hidden, economic costs,
including both economic and political distortions.

11. Purchasing power party(ppp) explains

O a. movements in the exchange rate between two countries' currencies by changes in the
countries' price levels

Ob movements in the exchange rate between two countries' currencies by changes in the countries'
GDP levels

Oc. movements in the exchange rate between two countries' currencies by changes in the countries'
import levels

Od movements in the exchange rate between two countries' currencies by changes in the countries'
export levels

13. The time rate of change of price (P) dP/dt is directly proportional to the excess demand

f(Qa - Q.) where Qa= a - BP and Q, = wP - Yor d = f((a+Y)-(3+w)P) and the equilibrium price is P.

Which one of the following describes the time path P(t) in a general form with arbitrary constant A?

O a. P(t) = Ae-f(B+w) + AP

O b. P(t) = Ae-f(B+w)t + P

Oc. P(t)= e-f(B+w)

O d. P(t) = Ae-1(8+w) + Pe-1(8+)

14.The money obtained printing money to finance government budget deficit is considered as

O a. Tax on the monetary authorities and revenue for the public

O b. Revenue for both the monetary authorities and the public

Oc. Revenue for the monetary authorities and tax to the public

O d. tax for both the monetary authorities and the public

15.Which one of the following characterizes capital investment decision?

O a. It tends to decrease with advanced technology

O b. It is given lesser emphasis at firm level

Oc. It involves low amount of capital outlay

O d. It cannot be reversed without incurring substantial cost

16. Along a straight line demand curve,

O a. Both slope and elasticity are constant

b. There is constant elasticity but different slope

c. Both slope and elasticity are different

d. Slope is constant but elasticity is different

17. The discontinuous part of the MR in the kinked demand curve model explains____

O a That firms keep the price and output same, even when there is change in cost
Ob That at any point to the left of the kink, MC is above the MR, while to the right of the kink MC is
lower than the MR.

Oc. Cost fluctuation that don't shift MC outside the discontinuity in the MR curve will result in the
firm to change either

price or output

Od. That if the price of a firm increases above the price that corresponds to the kink, the firm would
expect that other firms

will follow him

18. Which of the following streams of thought can correctly be categorized under one development
view?

O a Free market approach the public choice approach and "AK model of development approach.

Ob the neo colonial dependence model, the false paradigm model, and the dualistic-development
thesis

0 c. Two-sector surplus labour model the patterns of development empirical analysis, and the
dualistic-development thesis

Od Stages of growth model of development, AK model of development and the "market-friendly"

19. Given: a hypothetical income distribution among ten individuals as 0.7, 1.5, 2, 0.5, 0.9, 2, 3, 0.8,
0.6, 3 and a poverty line of 1.2

Based on the above hypothetical data, what is the head count index of the group?

O a. 0.6

O b. 0.5

О с 04

O d. 0.91

20. Which one of the following is the monopoly element of monopolistic competition?

O a large number of sellers and buyers

Ob. Availability of close substitutes

Oc .Perfect information

Od Free entry and exit of firms

21. Which of the following is an example of a time series data for in Ethiopia

O a. number of undergraduate economics students taking exit exam in the 2023.

O b. export of 2000 firms in the 2023

O c. consumption of 2000 households in the year 2023

O d. Ethiopian total export from 2000 to 2023

22. We can precisely predict the outcome of any game in which

O a. One player has dominant strategy while the other 's is dominated strategy

O b. Every player has a dominant strategy

O c. All players have dominated strategies

O d. There are only two players in the game

23. The strongest argument for an independent central bank rests on the view that

O a. Subjecting it to more political pressures would control an inflationary bias to monetary policy

O b. Subjecting it to more political pressures would reduce inflation

Oc. Subjecting it to more political pressures would reduce unemployment

O d. Subjecting it to more political pressures would impart an inflationary bias to monetary polic

24. Financial institutions are very important for functioning of the modern economic system in
general and encourage economic

growth in particular because

O a. they encourage saving and thus capital accumulation

Ob they distribute risk to all banks equally

Oc. they employ they university graduates

O d. they create information asymmetry between borrowers and lendersy

25. The Mercantilists view on trade may be summarized by

O a. Enhancement of free trade

O b. Restricting the use of gold and silver in trade

O c. Focus on expansion of imports

O d. Advocacy of trade restriction

26. International economics is best understood as

O a. Application of microeconomics to international Economics

O b. Application of macroeconomics to international economics

O c. Application of microeconomics to development economics

O d. Application of macroeconomics to development economics

27.Which of the following is correct description of the set of partial equilibrium effects of tariff on
the economy?

O a increase in domestic consumption, increase domestic output, increase imports, increased

revenue, redistribution of income from consumers to producers
Ob Decrease in domestic consumption, decrease domestic output, increase imports, increased
revenue, redistribution of income from consumers to producers

0c.increase in domestic consumption decrease in domestic output, decrease imports, increased

revenue, redistribution of income from consumers to producers

Od. Decrease in domestic consumption, increase domestic output, decrease imports, increased
revenue, redistribution of income from consumers to producers

28.Which one of the following holds true if there is an increase in the marginal propensity to
consume?

O a. An increase in output and a reduction in the multiplier

O b. An increase in output and an increase in the multiplier

Oc. A reduction in output and an increase in the marginal propensity to consume

O d. A reduction in output and a reduction in the multiplier

29.Which one of the following is the distinguishing feature of oligopoly market?

O a. Differentiated products

O b. Price setting behaviour

O c. Positive or zero long run profit

Od. Interdependence among firms

30.Which one of the following is correct about the income effect of the price change?

O a Change in the price of one of the good doesn't have any impact on the purchasing power of the
consumer budget.

Ob Graphically it is represented by a movement from one point to another along the same
indifference curve.

Oc. It is an effect that affords the consumer the opportunity to substitute the cheaper good for the
expensive one.

Od. It brings in an increase in satisfaction if price of one of the normal good declines

31.Which one of the following factors rendered the import-substituting strategy of industrialization
largely unsuccessful?

O a Foreign manufacturers were getting only little benefits left over from local industrialist and could
not sustain their presence.

O b. Protective tariff walls provided immunity from competitive pressures and many Import
substitution industries remained inefficient and costly to operate.

Od. Wealthy local industrialists with whom foreign manufacturers cooperate could not provide their
political and economic support cover.

32.What is reduced-form equation in simulations systems of equations in econometric?

O a. It is one that expresses an endogenous variable uniquely in terms of the predetermined
variables and the stochastic disturbances and future values of the predetermined variables

Ob.it is one that expresses an endogenous variable uniquely in terms of the predetermined variables
and the stochastic disturbances

Oc. It is one that expresses an exogenous variable uniquely in terms of the predetermined variables
and the stochastic disturbances

O d. It is one that expresses stochastic disturbances variable uniquely in terms of the endogenous
variables

33.Which one of the following factors rendered the import-substituting strategy of industrialization
largely unsuccessful?

O a. Foreign industrialists who were the main beneficiaries of the import substitution process could
not remit their profits abroad.

O b. Wealthy local industrialists with whom foreign manufacturers cooperate could not provide their
political and economic support cover.

OC. Foreign manufacturers were getting only little benefits left over from local industrialist and could
not sustain their presence.

O d. Protective tariff walls provided immunity from competitive pressures and many Import
substitution industries remained inefficient and costly to operate

34.Following the quantity theory of inflation, if the aggregate output is growing at 3% per year and
the growth rate of money is 5% then inflation is

O a. 2%

O b. 8%

O c. 15%

O d. 7%

35.The principle that measures project cash flow, say for year t, by taking the positive difference
between the cash flow for the firm

with the project for year t and the cash flow for the firm without project for year t is known as

O a. Long term fund principle

O b. Incremental principle

Oc. Post tax principle

O d. Exclusion of financing costs principle

36.For a risk lover consumer, which of the following is true?

O a. The utility of the expected value of wealth is greater than the expected utility of wealth.

O b. Nothing can be said about the two without additional information

Oc. He is indifferent between the utility of the expected value of wealth and the expected utility of
wealth.

Od. The utility of the expected value of wealth is less than the expected utility of wealth.

37.Which one of the following is cause for high fertility rates in developing countries?

O a. The growth of population that is accompanied by high level income flows

O b. Chronic low levels of living or absolute poverty that force people to limit the number of their
progeny

Oc. A universal tendency for the population of a country, unless checked by dwindling food supplies,
to grow at a geometric rate,

O d. Diminishing returns to the fixed factor, land, that limits food supplies to expand only at a
roughly arithmetic rate

38.In comparative cost advantage theory, the commodity in which the nation has the highest
opportunity cost of production has

O a. Medium comparative advantage

O b. Difficult to conclude

Oc. The highest comparative advantage

O d. The least comparative advantage

39.The observed facts from the household income consumption confirm that

O a. the marginal propensity to consume is between-to 0

Ob the marginal propensity to consume is between 0 and 1

Oc. the marginal propensity to consume is between 1 and 1

O d. the marginal propensity tom consume is equal to 0

40.in a financial analysis, which of the following is correct?

O a. Interest is not treated as cost to the firm

Ob. The main concern is the firm

Oc. Shadow or accounting price is considered

Od .Interest on capital is not deducted from the gross return

41.According to the most common way to define the developing world by per capita income in
which income group are developing countries generally classified?

O a. Countries in low income, lower medium income and emerging markets.

O b. Countries in low income and emerging markets with fast per capita income growth.

Oc Countries with low income but with fast per-capita growth

O d. Countries in low income, lower-middle income, or upper-middle income groups

42.Which of the following signify the results of the project in terms of the goals achieved and a
number of products produced?

O a Output Indicators

Ob Outcome Indicators

Oc Input Indicators

Od Impact Indicators

43.Which of the following is a qualitative variable used in econometric analysis?

O a. Monthly income of the individual

O b. Height of individual

O c. Education status of the individual

O d. Sex of individual

44.In practice cartel may not achieve the maximum profit due to one of the following reason.

O a. Slow process of cartel negotiation

O b. Restricted entry

O c. Variability of negotiated price

O d. The existence of low cost firms

45.What are the components of balance of payment?

O a current account and capital account

O b. Capital account only

Oc Current account only

O d. Capital account, current account and statistical discrepancy

46.Given the following money demand as a function of income and interest rate, AfD 10Y-0.64 and
money supply functions, MS=200 (the figures are in millions of birr), what is the LM equation?

O a Y=20-0.6i

O b. Y=200-0.6i

c Y=200- 1.6i

Od Y=20-0.06i

47.One of the following best describes the role of education and health in development

O a. They are inputs of to the aggregate production function

O b. They have dual role as both inputs and outputs

O c. They are objectives of development

Od. They have little role as input and output but are final consumption items
48.The firm's production function exhibits_

O a. The relationship between the quantities of fixed inputs used and the maximum quantity of
output that can be produce

b. A combination of efficient and inefficient methods of production

O c The various ways that that a firm can transform inputs into output, given current knowledge
about technology and organization.

O d. The production relationship between the quantities of variable inputs used and the maximum
quantity of output that can be produced

49.The rationale for studying international trade is closely related to

O a. The effect what is happening around the world is of less importance to local life

O b. The rapid integration of ideological and political affaires

O c. Businesses, consumers, and governments concern on what is going on in their locality

O d. Rapid integration of international economic markets

50.The principle that no commercial discrimination between supplier countries should be instituted,
implies that

a. Tariff should be applied at different rate and to all imports of that commodity but with differences
in timing among supplying country

b. Tariff should be applied at the same rate and to all imports of that commodity independently of
the supplying country

c. Tariff should be applied at the same rate and to all imports of that commodity but with some
discrimination among supplying country

O d. Tariff should not be applied at the same rate and should not apply to all imports of that
commodity independently of the supplying country

51.For the competitive firm the short run supply curve is

O a. That portion of its short run average variable cost curve that lies above the marginal cost curve.

Ob. That portion of its short run marginal cost curve that lies above the average variable cost curve.

Oc. That portion of its short run average total cost curve that lies above the average variable cost
curve.

Od. That portion of its short run marginal cost curve that lies above the average cost curve.

52.Which of the following is true about a monopoly market?

O a. The monopolist set its price equal to its marginal cost to maximize its profit

O b. The demand curve a monopoly faces is different from the market demand curve

Oc. The monopoly doesn't lose all its sales if it raises its price

Od. Consumers buy more than at the monopoly price than they would at the competitive price
53.For a Monopsonist the marginal expenditure curve is above the average expenditure curve
because

O a Average expenditure curve is constant irrespective of the level of employment

Ob The firm has monopsony power in the factor market

Oc. There is monopolistic exploitation under monopsony

Od. Every additional unit of labour employed is paid higher wage

54.One of the following best describes the model that viewed the process of development as a
series of successive stages of economic growth through which all countries must pass

O a. Mainly an economic theory that viewed the process of underdevelopment as a coordination

problem

Ob. Mainly a social theory that viewed the process of development as a series of successive
structural change through which countries must pass

Oc. Primarily a political economic theory that viewed the process of development as a struggle
between the centre and periphery

Od. Primarily an economic theory of development in which the right quantity and mixture of saving,
investment, and foreign aid were all that was necessary to enable developing nations to proceed
along an economic growth path that had historically been followed by the more developed
countries.

55.Investment is defined as

O a. a stock of output that is used to maintain or increase capital stock of an economy in a given
period of time

Ob a stock of output that is used to maintain or decrease capital stock of an economy in given period
of time

Oc. a flow of output that is used to maintain or increase capital stock of an economy in a given
period of time

O d. a flow of output that is used to maintain or decrease capital stock of an economy in a given
period of time

56.Which one of the following difficulties appears as problems of measuring aid?

O a. Aid flows at nominal levels of aid need inflating for rising prices

O b. The need to discounting dollar values of loans, tied loan having different real value from its
value, nominal levels of aid needing deflating for rising prices

Oc. An expensive Suppliers to tied aid increases the real value of aid money to the recipient of aid

O d. Simple additions of aid money to grants necessitate computing the value of tied aid by source or
project

57.The quantity theory of money is a theory of how the nominal value of aggregate Income is
determined. The most important feature of this theory is, it suggests that:
O a. velocity of circulation of money has no effect on the demand for money.

O b .Prices have no effect on the demand for money.

Oc. Incomes have no effect on the demand for money.

Od. Interest rates have no effect on the demand for money.

58.Which one of the following functions of agriculture may be assumed to be a passive and
supportive role in traditional conception of economic development?

O a. The primary purpose of providing sufficient low-priced food and manpower to the expanding
industrial economy.

O b. The primary purpose of providing high priced and marketable agricultural products to the
export sector.

Oc. Provider agricultural technology and agricultural inputs to modern Industries

O d. Primary role of being a dynamic "leading sector in any overall strategy of economic
development.

59.There are many advantages of panel data analysis. Which one the following is one of such
advantage of panel data?

O a. By combining time series of cross-section observations, panel data give "more informative data,
more variability, and more collinearity among variables, more degrees of freedom and more
efficiency".

O b. By combining time series of cross-section observations, panel data give "more informative data,
less variability, less collinearity among variables, more degrees of freedom and less efficiency".

O c. By combining time series of cross-section observations, panel data give "less informative data,
more variability, less collinearity among variables, more degrees of freedom and more efficiency".

O d. By combining time series of cross-section observations, panel data give "more informative data,
more variability, less collinearity among variables, more degrees of freedom and more efficiency".

60.Which one of the following is excluded from the government purchases component (G) of
aggregate expenditure?

O a. National defence expenditures

O b. Government Spending on road construction

O c. Salaries of government employees

O d. Transfer Payment

61.In developing a system of monitoring, which one of the following points should be taken into
consideration?

O a. It should take into account the entire aspects of project preparation

O b. it must be viewed as an end in itself

O c. it must lay more emphasis on financial targets

O d. It must be viewed as a means to implement the project successfully

62.Which of the following is the most transparent and direct monetary policy instrument in
Ethiopia?

O a. Credit rationing

O b. Foreign exchange rationing

Oc. Sell of foreign currency

O d. Reserve requirement

63.The demand for labor is described as

O a. A direct demand

O b. Substitute demand

O c. Derived demand

O d. Complementary demand

64.All else equal, what will happen if a country's currency appreciates

A. Lowers the relative price of its exports and raises the relative price of its imports.

B. Raises the relative price of its exports and lowers the relative price of its imports.

C. Lowers the relative price of its exports and lowers the absolute price of its imports.

D. Raises the absolute price of its exports and lowers the relative price of its imports.

65.Which one of the following is true about the budget constraint given as, y = 10-1/2x, where x and
y are goods?

O a. If the consumer spends all of his money on x, the maximum y he can buy is 20

O b. If the consumer spends all his money on y, the maximum x he can buy is 10

Oc. Bundle (2,8) is affordable and lies within the budget set

O d. For every extra one unit of x purchased, the consumer needs to forgo 2 units of y

66.Select the condition under which the firm decides how much labour to hire

O a. MRPL = L

O b. MRPL = W

O C.MPL = W

O d. MCL = W

67.One of the following components does not belong to the classical comer stone's of the Laissez-
Faire policy.

a. Interest rate rigidity

b. Says Law - Supply creates its own demand

c No state intervention

d.Full employment