Free Economy of Pakistan MCQs with Answers

• A. A fall in labour-force pressure
• B. Higher unemployment or underemployment
• C. An automatic rise in labour productivity
• D. A permanent improvement in living standards

Explanation: When the number of potential workers expands faster than available jobs, more people may remain unemployed or accept insufficient work.

• A. Concentrating infrastructure in one major city
• B. Expanding public investment in less-developed districts
• C. Reducing access to education in rural areas
• D. Limiting transport links between provinces

Explanation: Public investment in roads, schools, health facilities and reliable utilities in less-developed areas can improve their productive…

• A. Balance of payments identity
• B. Keynesian investment multiplier
• C. Law of diminishing returns
• D. Principle of absolute advantage

Explanation: The investment multiplier reflects repeated rounds of spending generated when one person's expenditure becomes another person's income.

• A. Indirect taxes minus subsidies and depreciation
• B. Net exports minus private consumption spending
• C. Government transfers minus capital formation
• D. Imports minus exports and inventory changes

Explanation: The income approach adds factor incomes such as wages, rent, interest and profits, with related national accounting adjustments.

• A. State Bank of Pakistan
• B. Ministry of Finance
• C. National Bank of Pakistan
• D. Securities and Exchange Commission

Explanation: The State Bank of Pakistan is responsible for issuing and managing Pakistan's currency notes under the law governing the central bank.

• A. National income or the tax base
• B. Government borrowing from banks
• C. Imports of capital goods
• D. The central bank's foreign reserves

Explanation: Tax buoyancy measures how responsive tax revenue is to changes in national income or the relevant tax base, including the effects of…

• A. Reliable irrigation water
• B. Higher import tariffs
• C. Urban population growth
• D. A larger services sector

Explanation: Irrigation supplies water when rainfall is insufficient or irregular, making crop production more reliable.

• A. Raise their domestic price and protect local producers
• B. Lower their domestic price and reduce import costs
• C. Increase foreign competition for domestic producers
• D. Eliminate the need for foreign exchange reserves

Explanation: A tariff raises the domestic price of the imported product, giving competing local producers some protection.

• A. Commercial banking
• B. Cement manufacturing
• C. Cotton spinning
• D. Fertilizer production

Explanation: Commercial banking provides financial services and is therefore part of the services sector.

• A. Borrowed mainly from lenders within the country
• B. Always denominated in foreign currency
• C. Borrowed only from international institutions
• D. Excluded from the government's debt servicing costs

Explanation: Domestic public debt is raised mainly from residents and institutions within Pakistan, commonly in Pakistani rupees.

• A. Reviewing economic conditions and formulating development plans
• B. Collecting federal income tax from individuals
• C. Regulating commercial banks' daily branch operations
• D. Issuing Pakistan's currency notes

Explanation: The National Economic Council reviews the country's economic condition and advises on plans for economic, social and financial…

• A. Highly volatile food and energy prices
• B. Prices of all domestically produced goods
• C. Prices of all imported capital goods
• D. Prices of services supplied by government offices

Explanation: Core inflation removes items such as food and energy whose prices often fluctuate sharply in the short term.

• A. Lower production costs for those factories
• B. Raise the cost of the imported raw material
• C. Reduce the supply of the raw material immediately
• D. Guarantee a rise in the government's tariff revenue

Explanation: A lower tariff reduces the tax-inclusive price of the imported input, which can lower production costs for firms using it.

• A. Agriculture and livestock
• B. Manufacturing and mining
• C. Wholesale and retail trade
• D. Transport and communications

Explanation: Agriculture and livestock have traditionally provided the largest share of employment in Pakistan, especially in rural areas.

• A. Total population
• B. Working population
• C. Labour force
• D. Number of households

Explanation: Per capita income is national income divided by the total population. Dividing by the labour force or working population would produce a…

• A. Wider use of improved seeds and irrigation
• B. Higher dependence on seasonal rainfall
• C. Greater use of subsistence farming methods
• D. Reduced access to agricultural research

Explanation: Improved seeds and reliable irrigation can raise output per hectare and reduce dependence on uncertain rainfall.

• A. Quantity of goods imported
• B. Tax rate on domestic income
• C. Price of exported goods
• D. Value of domestic production

Explanation: An import quota restricts the physical quantity of a good that may enter a country.

• A. Current account balance
• B. Consumer price index
• C. Agricultural yield
• D. Labour force participation rate

Explanation: A persistent current account deficit often requires financing through borrowing, investment inflows or reductions in foreign exchange…

• A. Provincial revenue authorities
• B. The State Bank of Pakistan
• C. The National Highway Authority
• D. The Election Commission of Pakistan

Explanation: After constitutional changes, provincial revenue authorities generally administer sales tax on services within their respective provinces.

• A. A skilled engineer working only a few hours in an unrelated job
• B. A graduate actively seeking work with no job
• C. A worker changing jobs after leaving a previous employer
• D. A person outside the labour force who is not seeking work

Explanation: Underemployment occurs when a person works below his or her desired hours or skill level.