2017 E.

C 4th Quarter Economics model Exam for

Grade 12
Time Allowed 2:00’
Name ----------------------G/section ______ Roll No.----------
GENERAL DIRECTIONS

IN THIS EXAMINATION, THERE ARE A TOTAL OF 80 MULTIPLE CHOICE QUESTIONS. READ

CAREFULLY AND SELECT THE BEST ANSWER AND BLACKEN ONLY THE LETTER OF YOUR
CHOICE. YOU ARE ALLOWED TO WORK ON THE EXAM ONLY 2 HOURS.

1. What does GDP measure?

A. National debt B. Total tax revenue

C. Total market value of all final goods and services produced within a country

D. Income from abroad

2. Which of the following is NOT a macroeconomic goal?

A. Full employment B. Price stability

C. Equity in resource allocation D. Economic growth

3. What is included in GNP but not in GDP?

A. Domestic production by foreigners B. Government spending

C. Production by citizens abroad D. Imports

4. The expenditure approach to GDP calculation includes:

A. Wages, Rent, Interest, Profits B. C + I + G + (X - M)

C. Net exports + depreciation D. Value added of all firms

5. The difference between GDP and GNP is:

A. Net investment B. Net foreign income

C. Government spending D. Exports

6. The value added approach avoids:

A. Taxes B. Exports C. Double counting D. Imports

7. Which of the following is a non-factor payment in income approach?

A. Wages B. Rent C. Indirect business taxes D. Profit

8. Real GDP is adjusted for:

A. Imports B. Prices C. Exports D. Income

9. Inflation reduces the:

A. Government budget B. Purchasing power of money

C. Employment D. Investment

10. Unemployment where workers move between jobs is called:

A. Cyclical B. Structural C. Frictional D. Seasonal

11. Aggregate demand is composed of:

A. Only consumption B. C + I + G + (X-M) C. Wages and salaries D. Net exports

only

12. Which of the following shifts AD to the right?

A. Decrease in wealth B. Increase in taxes C. Rise in interest rates D. Rise in

foreign income

13. The SRAS curve is upward sloping due to:

A. Sticky wages B. Free markets C. Flexible prices D. Trade surplus

14. What happens at the LRAS curve?

A. Unemployment increases B. Prices are fixed

C. Full employment output is achieved D. Technology declines

15. What causes SRAS to shift?

A. Wealth B. Input prices C. Consumption D. Imports

16. Market failure means:

A. Market surplus B. Inefficient resource allocation

C. Excess supply D. Free trade

17. A free rider:

A. Pays more for public goods B. Avoids taxes

C. Enjoys public goods without paying D. Is unemployed

18. Externalities are:

A. Part of government revenue B. Effects on third parties not reflected in price

C. Imports and exports D. Private costs

19. Which of the following is a public good?

A. Bread B. Electricity C. National defense D. Cars

20. Which of the following is a solution to negative externalities?

A. Subsidy B. Taxation C. Free markets D. Imports

21. Asymmetric information exists when:

A. Prices are flexible B. Markets are in equilibrium

C. One party has more information than the other D. Government controls prices

22. Moral hazard occurs when:

A. Sellers do not disclose product quality

B. Consumers refuse to pay

C. One party’s actions cannot be observed

D. Everyone has full information

23. Consumer protection laws in Ethiopia are enacted to:

A. Protect producers only B. Prevent exports

C. Safeguard consumers from exploitation D. Reduce inflation

24. Which is NOT a consumer right in Ethiopia?

A. Right to safety B. Right to fair price

C. Right to form a union D. Right to accurate information

25. The main cause of public good underprovision in free markets is:

A. High costs B. Lack of competition C. Free-rider problem D. Subsidies

26. The objective of macroeconomic policy includes:

A. Raising government wages B. Full employment

C. Reducing subsidies D. Managing exports

27. Fiscal policy consists of:

A. Monetary base B. Government spending and taxation

C. Inflation control D. Credit control

28. What is NOT a component of government spending?

A. Transfer payments B. Interest payments

C. Capital gains D. Military spending

29. An expansionary fiscal policy involves:

A. Tax increases B. Government spending cuts

C. Increasing taxes and decreasing spending

D. Increased government spending

30. A contractionary fiscal policy is used to:

A. Reduce inflation B. Increase employment

C. Increase GDP D. Increase exports

31. Which is a monetary policy tool?

A. Import duty B. Subsidy C. Discount rate D. Government budget

32. Reducing the reserve requirement leads to:

A. More lending by banks B. Lower inflation

C. Higher interest rates D. Less investment

33. Open market operations refer to:

A. Government buying foreign currency B. Government printing money

C. Central bank buying or selling government securities

D. Public market regulation

34. Which policy increases money supply?

A. Selling securities B. Raising the discount rate

C. Increasing RRR D. Buying securities

35. Income policies aim to:

A. Set prices of exports B. Control wages and prices

C. Subsidize public goods D. Manage labor migration

36. A tax is:

A. Voluntary payment B. Paid by government to consumers

C. Compulsory unrequited payment to government D. A donation

37. Which is a direct tax?

A. VAT B. Excise tax C. Business income tax D. Customs duty

38. The principle of ability to pay is associated with:

A. Equal tax amount for all B. Higher taxes for the rich

C. Lower taxes for the rich D. Equal distribution of services

39. Which tax is regressive?

A. Income tax B. Wealth tax C. Sales tax D. Business tax

40. Indirect taxes are:

A. Paid only by producers B. Transferred to consumers

C. Non-compulsory D. Part of GDP

41. Which of the following is a feature of a good tax system?

A. Arbitrary collection B. Complexity C. Equity and certainty D. Hidden rates

42. Progressive tax means:

A. All pay same amount B. Poor pay more tax

C. Rich pay higher percentage of income D. Flat rate for all

43. VAT in Ethiopia is:

A. Direct tax B. Progressive tax C. Indirect tax at 15% rate D. Collected only on
imports
44. Schedule A income refers to:

A. Rental income B. Capital gains

C. Business income D. Employment income

45. Schedule D includes:

A. Employment B. Casual rental, games, interest

C. Property tax D. Royalties only

46. Economic development refers to:

A. Only increase in GDP B. Increase in living standards and welfare

C. Employment of skilled labor D. Export growth

47. Which is NOT a characteristic of developing countries?

A. High income per capita B. High population growth

C. Agricultural dependency D. Low industrialization

48. Which is a non-economic factor affecting development?

A. Natural resources B. Climate C. Capital formation D. Infrastructure

49. HDI includes all except:

A. Life expectancy B. Education level C. GDP per capita D. Export volume

50. Underdevelopment is reflected by:

A. Full employment B. Balanced income distribution

C. Technological backwardness D. Low birth rate

51. Globalization leads to:

A. Decreased capital flow B. Trade barriers

C. Increased global interdependence D. Protectionism

52. Which of the following is a regional economic group?

A. WTO B. IMF C. EU D. UN

53. Trade liberalization promotes:

A. Import substitution B. Decreased competition C. Free trade D. Tariffs

54. One disadvantage of globalization is:

A. Access to wider markets B. Cultural dominance

C. Foreign direct investment D. Technology transfer

55. Ethiopia is a member of:

A. ASEAN B. SADC C. COMESA D. NAFTA

56. Exchange rate is:

A. Trade policy B. Price of one currency in terms of another

C. GDP per capita D. Capital inflow

57. Devaluation under fixed exchange rate means:

A. Market-driven rise in currency value

B. Government decreases currency value

C. Currency becomes stronger D. Exports become more expensive

58. Depreciation in floating system leads to:

A. Cheaper imports B. Improved trade balance

C. Reduced exports D. Currency appreciation

59. Flexible exchange rates are determined by:

A. Government policy B. Supply and demand in currency markets

C. IMF D. Export licenses

60. Which of the following worsens trade balance?

A. Currency devaluation B. Import substitution

C. Currency appreciation D. Export subsidies

61. The balance of payments includes:

A. Only exports B. Budget deficit

C. Current and capital account D. Consumer expenditure

62. A current account surplus means:

A. Exports < imports B. More imports than capital inflow

C. Exports > imports D. Currency devaluation

63. Capital account records:

A. Government spending B. Export of goods

C. Foreign investments and loans D. Only tourism income

64. Which of the following causes currency depreciation?

A. High interest rate B. Political instability

C. High inflation D. Both B and C

65. Which affects foreign exchange rate?

A. Trade policies B. Interest and inflation rates

C. Balance of payments D. All of the above

66. A fixed exchange rate is maintained by:

A. IMF B. Currency speculation

C. Government or central bank intervention D. Market forces

67. Floating exchange rate system advantage:

A. Requires large reserves B. More vulnerable to shocks

C. Automatically adjusts trade balance D. Prevents speculation

68. Exchange rate appreciation:

A. Increases export demand B. Makes imports cheaper

C. Increases GDP D. Boosts inflation

69. Which policy tool helps stabilize exchange rates?

A. Taxation B. Open market operation

C. Foreign reserve intervention D. Wage freeze

70. A devaluation will likely lead to:

A. More imports B. Export growth

C. Currency appreciation D. Lower domestic prices

71. What does CPI measure?

A. GDP per capita B. Cost of government spending

C. Average price changes in a basket of goods D. Tax burden

72. Who is the founder of Monetarism?

A. John Maynard Keynes B. Adam Smith

C. Milton Friedman D. Karl Marx

73. Keynesian economics supports:

A. No government intervention B. Deregulated markets

C. Active fiscal policy D. Only monetary tightening

74. Which school believes in rational expectations?

A. Classical B. Keynesian C. New Classical D. Monetarist

75. Frictional unemployment results from:

A. Cyclical downturns B. Mismatch of skills C. Job transition period D. Automation

76. Consumer surplus is:

A. Price received minus cost B. Price paid minus value

C. Value received minus price paid D. Government revenue

77. The labor force includes:

A. Only employed B. Only unemployed C. Employed + Unemployed D. Students

and retirees

78. A positive externality leads to:

A. Overproduction B. Underproduction C. Trade surplus D. Negative welfare

79. Price ceiling causes:

A. Surplus B. Shortage C. Equilibrium D. Tax increase

80. GDP deflator is used to:

A. Calculate tax burden B. Adjust inflation from GDP

C. Measure imports D. Calculate wages

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