Free Economy of Pakistan MCQs with Answers

• A. Current prices of the same year
• B. Constant prices of a base year
• C. Market prices after tax collection
• D. Foreign prices converted into rupees

Explanation: Real GDP values goods and services at constant prices from a selected base year, so the effect of inflation is removed.

• A. Foreign direct investment inflows
• B. Exports of goods and services
• C. Government borrowing from abroad
• D. Changes in official foreign reserves

Explanation: The current account records trade in goods and services, income flows and current transfers such as remittances.

• A. Total revenue over total expenditure
• B. Total expenditure over total revenue
• C. Exports over imports of goods
• D. Money supply over currency circulation

Explanation: A fiscal deficit occurs when total government expenditure exceeds total government revenue during a financial year.

• A. Reduce inflationary demand pressures
• B. Increase government development spending
• C. Raise exports through cheaper credit
• D. Increase the supply of currency notes

Explanation: A higher policy rate makes borrowing more expensive and can reduce excessive demand, helping contain inflation.

• A. Current account as secondary income
• B. Financial account as portfolio investment
• C. Capital account as fixed investment
• D. Reserve account as official borrowing

Explanation: Workers' remittances are current transfers and therefore appear under secondary income in the current account.

• A. The tax rate falls as income rises
• B. The tax rate stays fixed for every taxpayer
• C. The tax rate rises as income rises
• D. The tax is charged only on imported goods

Explanation: In a progressive tax system, higher income groups pay a larger proportion of their income in tax.

• A. Accumulated payment arrears across the energy chain
• B. Total foreign loans used for power projects
• C. Annual losses of the central bank
• D. Unpaid taxes collected from textile firms

Explanation: Circular debt develops when payment shortfalls move through generators, distributors, fuel suppliers and other participants in the energy…

• A. Workers produce more than their firms require
• B. Some workers add little or no extra output
• C. All workers receive wages above market rates
• D. Unemployed people move to another province

Explanation: Disguised unemployment occurs when more workers are engaged than are needed, so removing some workers causes little or no reduction in…

• A. Federal and provincial development projects
• B. Private banks' short-term lending
• C. Routine salaries of government employees
• D. Daily changes in the stock exchange index

Explanation: The Public Sector Development Programme, or PSDP, sets out public development projects and their expected allocations.

• A. A rising share of dependants and fewer workers
• B. A large working-age population with suitable jobs
• C. A falling labour force and higher birth rates
• D. A growing population without investment in skills

Explanation: A demographic dividend can arise when the working-age population forms a large share of the total and the economy provides productive…

• A. Private consumption + investment + government spending + net exports
• B. Private consumption + saving + taxation + imports
• C. Wages + rent + interest + profits + depreciation
• D. Exports + imports + government revenue + private saving

Explanation: The expenditure approach adds consumption, investment, government spending and net exports.

• A. Demand pull inflation
• B. Cost push inflation
• C. Structural deflation
• D. Imported disinflation

Explanation: Cost push inflation occurs when production costs rise and firms pass those costs to consumers.

• A. The Federal Board of Revenue
• B. The National Economic Council
• C. The Monetary Policy Committee
• D. The Council of Common Interests

Explanation: The Monetary Policy Committee of the State Bank decides monetary policy, including the policy rate.

• A. Total income and total expenditure
• B. Exports and imports of goods and services
• C. Merchandise exports and merchandise imports
• D. Capital inflows and capital outflows

Explanation: The balance of trade traditionally measures merchandise exports minus merchandise imports.

• A. Make imports cheaper and exports more expensive
• B. Make imports more expensive and exports more competitive
• C. Reduce the rupee value of foreign debt
• D. Eliminate the country's trade deficit immediately

Explanation: A weaker rupee raises the domestic price of imported goods and can make Pakistani goods cheaper for foreign buyers.

• A. Average income of people below the poverty line
• B. Percentage of the population living below the poverty line
• C. Total cost of removing poverty from an economy
• D. Difference between rich and poor household incomes

Explanation: The headcount ratio is the share of people whose income or consumption falls below the defined poverty line.

• A. Employed in the formal sector only
• B. Employed or actively seeking employment
• C. Receiving wages from a registered employer
• D. Working full time for at least thirty hours

Explanation: The labour force includes employed people and those actively seeking work.

• A. The money supply rises without a change in output
• B. Employment and output gradually shift from agriculture toward industry and services
• C. The government replaces all private firms with public enterprises
• D. The exchange rate remains fixed over a long period

Explanation: Structural transformation describes the changing composition of production and employment as an economy develops.

• A. Distribution of federal tax revenues between the federation and provinces
• B. Approval of the State Bank's annual monetary policy
• C. Regulation of imports through customs duties
• D. Allocation of agricultural land among provinces

Explanation: The National Finance Commission recommends the distribution of specified federal revenues between the federation and the provinces, as…

• A. Finance domestic salaries without taxation
• B. Meet external payment obligations and support exchange market stability
• C. Increase agricultural land without investment
• D. Replace the need for all government borrowing

Explanation: Foreign exchange reserves provide liquid external assets for paying imports, servicing external obligations and managing pressure in the…