KPK PMS Economics Paper I – 2008

KPK PMS Economics Paper I – 2008

Note: Read the following instructions carefully.

1. Attempt any Five questions
2. All questions carry equal marks
3. Extra attempt of any question or any part will not be considered
4. Candidates must draw two straight lines at the end to separate each question in answer book.

Question 1: Analyse the process of Price-output decision under pure competition. What will be the shape of long supply curve in this market form?

Question 2: Explain and illustrate diagrammatically the consumption, protection and revenue effects of an import tariff under particular equilibrium.

Question 3: What are the conditions for consumer’s equilibrium in ordinal utility approach? Why does a consumer choose a combination of two goods when marginal rate of substitution equals the commodity price ratio?

Question 4: Excess reserve make a bank less vulnerable to runs. Why then bankers don’t like to hold excess reserves? What circumstances might persuade them that would be advisable to hold excess reserves?

Question 5: The quantity theory states that the impact of money on real GDP can be determined with details about the aggregate supply curve, so long as the velocity of money is predictable. Discuss the reasoning behind this claim.

Question 6: Explain how steepness of the short run aggregate supply curve affects the government’s ability to use fiscal policy to change real GDP?

Question 7: What is the incidence of a tax? Discuss the factors that determine the incidence of a Commodity tax.

Question 8: Please examine the theory of demand management (Keynesian Theory) with supply side economics (Milton Friedman).