BOOKLET CODE 89 SUBJECT CODE 09

11. The satisfaction obtained from consumption of one extra unit of commodity is known as:

A. total utility C. elastic utility

B. average utility D. marginal utility

D. marginal utility

12. What is the long-run effect of a price ceiling?

A. Deflation C. inflation

B. shortages D. surpluses
B. shortages

13. Which of the following statements is true about the elasticity of demand?

A. When quantity demand for a commodity does not change as a result of changes in its
own price, it is said to be perfectly elastic.

B. When quantity demand for a commodity does not change as a result of changes in its
own price, it is said to be perfectly inelastic.

C. When the demand for a commodity changes by a larger percentage than the percentage
change in its own price, it is said to be perfectly inelastic.

D. When the demand for a commodity changes by a smaller percentage than the
percentage change in its own price, it is said to be perfectly inelastic.

B. When quantity demand for a commodity does not change as a result of

changes in its own price, it is said to be perfectly inelastic.

14. Which of the following is true about the different notions of elasticity?

A. price and income elasticity’s refer to movements along the demand curve; other
elasticity’s refer to shifts of the entire demand curve.

B. price and cross-price elasticity’s analyze movements along the demand curve; other
elasticity’s refer to shifts of the entire demand curve.

C. price elasticity refers to movements along the demand curve; income and cross price
elasticity’s refer to shifts of the entire demand curve.
 D. Income curve; price elasticity elasticity’s refer to movements along the demand curve;
price elasticity refers to shifts of the entire demand curve.

C. price elasticity refers to movements along the demand curve; income and cross
price elasticity’s refer to shifts of the entire demand curve.

15. In a market for any commodity that is at disequilibrium price, whether controlled or not, the
quantity actually exchanged is determined by

A. The lesser of quantity demanded and quantity supplied.

D. Government decree or direction

C. The elasticity of demand.

D. The greater of quantity demanded and quantity supplied.

C. The elasticity of demand.

16. Which one of the following is NOT a possible reason for a rightward shift in the supply
curve of a commodity?

A. Decrease in the price of the commodity.

B. more suppliers have entered the industry.

C. Decrease in the quantity supplied at each price.

D. An increase in the quantity supplied at each price.

A. Decrease in the price of the commodity.

17. Voluntary trade promotes economic progress because it.

A. Benefits buyers at the expense of sellers.

B. Makes larger outputs possible as a result of specialization.

C. Encourages individuals to become self-sufficient.

D. Moves goods, services and resources from people who value them more to individuals
who value them less.
D. Moves goods, services and resources from people who value them more to individuals
who value them less.
18. A central economic problem involves making choices among alterative ends. Which of the
following necessitates the making of such choices?

A. Choices are made without sacrifices.

B. Choices do not involve opportunity costs.

C. Scarcity of resources relative to human wants.

D. Abundance of resources relative to human wants.

C. Scarcity of resources relative to human wants.

19. Economists usually say that ``There’s no such thing as a free lunch.`` what does this imply?

A. Everyone has to pay for his own lunch.

B. No one has time for a good lunch anymore.

C. The person consuming a good must always pay for it

D. Opportunity costs are incurred when resources are used to produce goods and services.

C. The person consuming a good must always pay for it

20. The problem of scarcity applies to

A. All economic systems, regardless of their level of development.

B. Only in industrially developed countries, because resources are scarce in these

countries.

C. Only in underdeveloped countries, because there are few productive resources in these
countries.

D. Only in economic systems that are just beginning to develop, because specialized
resources are scarce in these systems.
A. All economic systems, regardless of their level of development.

21. Which of the following is true about the policies and strategies of the agricultural sector
during the post- 1991 period?

A. Minimum package projects to reach smallholders.

B. Large scale mechanized commercial farm approach.

 C. Comprehensive package projects that are supported by Swedish international
development agency /SIDA/

D. Dualistic approach promoting both the smallholder farm system and large scale
mechanized farm system.
D. Dualistic approach promoting both the smallholder farm system and large scale
mechanized farm system.

22. Which one of the following is NOT true about the role of the agricultural sector in the
Ethiopian economy?

A. Its contribution to GDP is expected to increase as the country develops.

B. It provides employment and livelihood for large proportion of the labor force.

C. It has significant contribution to GDP though it has declined over the last decade.

D. It is expected to serve as a source of capital for the development of other sectors.

A. Its contribution to GDP is expected to increase as the country develops.

23. Which of the following is true about the role of agricultural sector in Ethiopia?

A. About 65% of the sector’s GDP comes from crop production.

B. About 5% of the sector’s contribution comes from the sub-sectors allied to agriculture.

C. Its contribution in the economy increased from 45% in the early 1960s to 76% in
2003/04.

D. About 30% of the sector’s contribution comes from animal husbandry (livestock
rearing.)
A. About 65% of the sector’s GDP comes from crop production.

24. Which of the following are the major traditional energy sources in Ethiopia?

A. Firewood, solar, geothermal, crop residue.

B. Solar, geothermal, charcoal, animal dung.

C. Firewood, Crop residue, charcoal, animal dung.

D. Hydroelectric power, solar, firewood, crop residue.

C. Firewood, Crop residue, charcoal, animal dung.

25. If producers expect economic growth to be more rapid in the future, then it is likely that.

A. Saving will decrease.

B. The investment curve will shift upwards.

C. Interest rates will decrease.

D. The marginal propensity to consume will decrease.

D. The marginal propensity to consume will decrease.

26. When the consumption curve is a straight line, the marginal propensity to save.

A. is equal to one plus to MPC

B. increases as income increases.

C. is equal to one minus the MPC

D. decreases as income increases.

B. increases as income increases.

27. The policy mix that causes the interest rate to increase and investment to decrease, but has an
indeterminate effect on aggregate output, is a mix of

A. Expansionary fiscal policy and expansionary monetary policy.

B. Contractionary fiscal policy and expansionary monetary policy.

D. Expansionary fiscal policy and contractionary monetary policy.

D. Contractionary fiscal policy and contractionary monetary policy.

D. Contractionary fiscal policy and contractionary monetary policy.

28. An expansionary monetary policy may promote long-run growth if it leads to

A. an increase in investment.

B. an increase in consumption.

C. an increase in government spending.

D. a constant level of government spending.

A. an increase in investment.
29. in the short-run, expansionary fiscal policy would result in aggregate

A. supply moving to the left.

B. supply moving to the right.

C. demand moving to the left.

D. demand moving to the right.

D. demand moving to the right.

30. in the context of international trade, ``Terms of Trade`` means the

A. excess of exports over imports.

B. excess of capital inflow over capital outflow.

C. ratio of a country’s export price to import price.

D. ratio of a country’s import price to export price.

D. ratio of a country’s import price to export price.

31. A market structure where there exists only a single seller of a product, who is the only
producer of the product, and that product has no close substitutes is known as.

A. Monopoly C. Duopoly

B. Monophony D. Oligopoly
A. Monopoly

32. in a free market economy, consumption and investment decisions:

A. are mostly controlled by the government.

B. are necessarily controlled by big businesses.

C. determine the future course of the national economy.

D. require protection from foreign forces, if it is desired that wealth is accumulated.

C. determine the future course of the national economy.
33. when inflation increases and becomes more volatile, resulting in greater uncertainty, which
of the following is most likely to occur?

A. investment by firms is likely to increase.

B. consumption by households is likely to increase.

C. international competitiveness is likely to improve.

D. the price system becomes less efficient as a coordinating mechanism.

D. the price system becomes less efficient as a coordinating mechanism.

34. which of the following is true about disguised unemployment?

A. it is a situation where workers become jobless due to loss of demand in a particular

regions or industries.

B. it is a situation is which more workers are engaged in a type of work than that which is
actually required to do the job

C. it is a situation which is associated with a period of recession or depression in trade or

business cycles.

D. it is a situation in which workers are thrown out of work in one location and are
unwilling or unable to move to a similar work in another area.
B. it is a situation is which more workers are engaged in a type of work than that which is actually
required to do the job

35. what are the three approaches to measuring economic activity?

A. cost, income, and expenditure approaches.

B. private, public, and international approaches.

C. Product, income, and expenditure approaches.

D. consumer, business, and government approaches.

C. Product, income, and expenditure approaches.

36. which of the following is true about the relationship between net domestic product (NDP)
and Gross Domestic Product (GDP)?

A. NDP is equal to GDP plus depreciation or capital consumption allowance

B. NDP is equal to GDP minus depreciation or capital consumption allowance.

C. NDP is equal to GDP time’s depreciation or capital consumption allowance

D. NDP is equal to GDP divided by depreciation or capital consumption allowance.

B. NDP is equal to GDP minus depreciation or capital consumption allowance.

37. which of the following distinguishes demand -pull inflation from cost –push inflation?

A. demand-pull inflation is persistent, while cost-push inflation is persistent.

B. demand-pull inflation is temporary, while cost – push inflation is persistent.

C. demand- pull inflation arises due to excess demand for goods and services, while cost-
push inflation arises due to the rise in the costs of production.

D. demand- pull inflation arises due to excess demand for goods and services, while cost-
push inflation arises due to excess supply of goods and services.

C. demand- pull inflation arises due to excess demand for goods and services, while cost-push
inflation arises due to the rise in the costs of production.

38. Depreciation of the United States Dollar (USA) relative to the Ethiopian Birr (ETB) would
tend to:

A. discourage US citizens from buying Ethiopian goods.

B. discourage Ethiopian tourists from traveling to US

C. discourage Ethiopian from buying US goods.

D. increase the number of Birr that could be bought with a dollars.

A. discourage US citizens from buying Ethiopian goods.
39. A potential problem with freely floating exchange rates is that

A. exchange rates may never reach equilibrium.

B. the currency markets may become monopolized.

C. people who practice arbitrage may gain from the losses of others.

D. uncertainty in exchange rate fluctuations may hinder international trade.

D. uncertainty in exchange rate fluctuations may hinder international trade.

40. which of the following represents the capital account component of the balance of payments
of a country?

A. the inflow and outflow of foreign currency resulting from the sale of goods.

B. the inflow and outflow of foreign currency resulting from the sale of services.

C. the flow of net transfers, including gifts and remittances that the country receives.

D. the flow of loans and investments that change a country’s foreign assets and liabilities.

D. the flow of loans and investments that change a country’s foreign assets and liabilities.

41. which of the following is NOT a rational for fiscal decentralization in Ethiopia?

A. Devolving fiscal decision-making power to lower level of governments.

B. narrowing existing in-balances in economic growth and development among regions.

C. assisting regional governments by boosting their capacity for developing their

localities through self-initiative.

D. Reducing the burden on the central government by eliminating fiscal transfers to

regional governments.

D. Reducing the burden on the central government by eliminating fiscal transfers to regional
governments.
42. Ethiopian income tax is --------------- because it ---------- with taxable income.

A. progressive ……. Increases

B. progressive ……. Decreases

C. regressive …….. increases

D. neutral ……….. does not change

A. progressive ……. Increases

43. Government budget deficit is commonly financed by all of the following EXCEPT one.

A. money printing

B. external borrowing

C. domestic borrowing

D. sale of public assets and properties

D. sale of public assets and properties

44. which one of the following is an economic role of governments in a market economy
system?

A. provision of public goods and services.

B. production of private goods and services.

C. Allocation of resources to their efficient use.

D. engaging in export and import of private goods and services.

B. production of private goods and services.

45. which one of the following statements is true about the impact of foreign exchange rate on a
country’s balance of payments?

A. an increase in the value of a country’ currency leads to favorable balance of payments.

B. a decrease in the value of a country’s currency leads to unfavorable balance of

payments.

C. An increase in the value of a country’s currency makes imports cheaper.

 D. A decrease in the value of a country’s currency makes exports cheaper and imports
expensive, leading to unfavorable balance of payments.

C. An increase in the value of a country’s currency makes imports cheaper.

46. the theory of comparative advantage states that

A. the basis for international trade is the difference in tastes and preference.

B. the basis for international trade is the difference in tastes and preference.

C. a country specializes and exports those goods in which it has lower relative costs.

D. a country specialized and exports those goods in which it has higher relative costs.
C. a country specializes and exports those goods in which it has lower relative costs.

47. which one of the following statements is NOT true about the performance of export sup-
sector of the Ethiopian economy?

A. coffee is the largest in value of exports

B. oilseeds is the leading item in terms of the value of export.

C. the value of exports of chat is grater than that of livestock.

D. the value of exports of meat and meat products is greater than that of fruits and
vegetables.
B. oilseeds is the leading item in terms of the value of export.

48. which of the following statements is true about the foreign trade of Ethiopia?

A. the main destination of exports is Asia.

B. imports are mainly agricultural products.

C. manufactured goods and services dominate exports.

D. agricultural commodities are main contributors to export earnings.

D. agricultural commodities are main contributors to export earnings.

 49. According to the data from the central statistical agency (CSA, 2007/08), which sub-sector of
the manufacturing sector made the largest contribution to foreign exchange in Ethiopia?

A. food and beverages C. textiles

B. leather and footwear D. wood and furniture

C. textiles

50. which of the following is NOT one of the direct contributions of the tourism sub-sector of the
Ethiopian economy?

A. contribution to employment.

B. foreign exchange contribution.

C. contribution to gross domestic Product (GDP)

D. contribution to the productivity of the manufacturing sub-sector.

D. contribution to the productivity of the manufacturing sub-sector.

51. which one of the following did NOT have a negative effect on the development of the
agriculture sector in Ethiopia?

A. adoption of agricultural development-led industrialization (ADLI).

B. land fragmentation and lack of effective land ownership entitlement.

C. uncertainty of the weather condition condition, resulting in drought and famine.

D. collectivization of peasants into peasant associations and forced grain delivery.

A. adoption of agricultural development-led industrialization (ADLI).

52. which one of the following is NOT among the arguments behind developing countries; such
as Ethiopia’s emphasis on the development of their industrial sector?

A. unlike the agricultural sector, the labor absorption potential of industrial sector is high.

B. unlike the agricultural sector, the industrial sector is not limited by natural events and
phenomena.

C. unlike the agricultural sector, the industrial sector is not affected by the competition
from other countries.
 D. unlike the agricultural sector, the industrial sector has significant backward and
forward linkages.
D. unlike the agricultural sector, the industrial sector has significant backward and forward
linkages.

53. which of the following is true about the industrial development strategy of Ethiopia during
the during the Derg regime (1974-1991)?

A. Enhancement of active participation of the private sector.

B. Development of infrastructure and technological capability.

C. privatization of large-and medium-scale public manufacturing firms.

D. nationalization of large-and medium-scale private manufacturing firms.

D. nationalization of large-and medium-scale private manufacturing firms.

54. which of the following features does not characterize the industrial sector in Ethiopia
currently?

A. small – scale and cottage/handcraft industries are owned and managed by the private
sector.

B. large and medium-scale manufacturing industries account for 80 percent of the

national output.

C. Ethiopian manufacturing industries are concentrated in food and beverages, textiles,

and non-metallic minerals.

D. the role of the public sector is largely limited to the areas of large-scare engineering,
communications, power, and pharmaceutical industries.
B. large and medium-scale manufacturing industries account for 80 percent of the
national output.
55. which one of the following statements is true about the industrial sector of the Ethiopian
economy?

A. its contribution to employment is less than both the agricultural and service sectors.

B. its contribution to employment is less than the agricultural sector but greater than the
service sector.

C. its contribution to the gross domestic product (GDP) is larger than the service sector
but less than the agricultural sector.

D. its contribution to the gross domestic product (GDP) is larger than the agricultural
sector but less than the service sector.
A. its contribution to employment is less than both the agricultural and service sectors.

56. which one of the following is NOT true about post-Derg industrial development strategies
and policies?

A. the government introduced measures to promote inter-and intra-sectoral linkages.

B. the government introduced policy measures to enhance access to finance for investors
in the sector

C. the government took the lead in industrial development by increasing investment in

state owned enterprises.

D. the government has invested in infrastructure to create conducive environment for

industrial development.

C. the government took the lead in industrial development by increasing investment in

state owned enterprises.

57. which one of the following is true about the different measures used to evaluation the
performance of the industrial sector?

A. value added at current market price refers to the sum pf value added at factor cost and
indirect taxes.

B. gross value of output refers to the total output produced per-worker during a given
period of time

C. value added at factor cost refers to the sum of the value of output per-worker and cost
of inputs per-worker.
 D. gross value of output refers to the total output produced per-unit of capital during a
given period of time.

A. value added at current market price refers to the sum pf value added at factor cost and indirect
taxes.

58. which one of the following is Not among the problems that the Ethiopia industrial sector
faces to develop?

A. Shortage of row material

B. High domestic demand for manufacturing output

C. use of obsolete technology in production process

D. Low productivity and low competitiveness with foreign producers

B. High domestic demand for manufacturing output

59. What are the main goals of the post-1991 education policies and strategies?

A. Achieving high quality by reduction quantity

B. Addressing the problem of quality of education by increasing quantity

C. Achieving high quality and quantity from given input by increasing efficiency

D. addressing the problem of providing education to large number of pupils by reducing

quality
C. Achieving high quality and quantity from given input by increasing efficiency

60. which of the following modes of transport has high potential of increasing efficiency and
competitiveness of the Ethiopia economy by decreasing cost of inland transport?

A. Railway C. Air transport

B. Road Transport D. Shipping lines

A. Railway
61. which of the following reasons best explains the major problem facing the financial sector in
Ethiopia?

A. Lending and collecting activities are limited .

B. The monetized sector of the economy is limited.

C. The credit authorization procedure are limited.

D. Lending institutions and their capacities are limited.

D. Lending institutions and their capacities are limited.

62. which one of the following was Not among the factors that put the Ethiopia economy n to a
very problematic situation during the end of Derg regime?

A. the civil wars that lead to internal instability.

B. mis management of the economy by the regime.

C. High inflow of foreign capital that was beyond the absorptive capacity of the
economy.

D. Recurrent drought that negatively affected the performance of the agricultural sector.

C. High inflow of foreign capital that was beyond the absorptive capacity of the economy.

63. which of the following is Not among the structural adjustment policy measure under taken in
Ethiopia in the early 1990s?

A. Devaluation of the Birr.

B. Introduction of tight monetary policy.

C. Expansion of economic role of the public sector and its expenditure.

D. Abolition of the interest rate ceilings so that interest rates are determined by the
market forces.

C. Expansion of economic role of the public sector and its expenditure.

64. All of the following are components of structural adjustment program EXCEPT one?

A. Reduction of public spending level by decreasing public deficit.

B. Redirection of productive resources from non-productive sectors.

C. Restructuring institutions towards competitiveness and efficiency.

D. Reduction of public spending level by decreasing public investment in infrastructure.

D. Reduction of public spending level by decreasing public investment in infrastructure

65. which of the following is Not a basic assumption behind the investment policy climate of
Ethiopia currently?

A. Public-sector investment in infrastructure plays key role for development of the

industrial sector.

B. private sector development is key to the development of the industrial sector and
development of the economy.

C. prohibiting the participation of foreign investors in manufacturing sector increase the

growth of domestic private sector.

D. public- sector provision of incentive packages to the private sector is necessary to

enhance the productivity and growth of the industrial sector.
C. prohibiting the participation of foreign investors in manufacturing sector increase the
growth of domestic private sector.

66. which one of the following is Not the major goals of national development plans under
EPRDF?

A. Poverty reduction through rapid economic growth.

B. development of governance system that ensures social justice.

C. Peoples participation in the democratic governance of the country.

D. Increasing income in equality to increase domestic capital accumulation.

D. Increasing income in equality to increase domestic capital accumulation.

67. according to the constitution of the federal democratic republic of Ethiopia, which of the
following is NOT among powers and functions given to the federal government?

A. rural land administration

B. maintaining sovereignty and security.

C. designing and implementing foreign policy.

D. designing and implementing monetary policy.

A. rural land administration

68. In the Ethiopia context 'Broad money supply' is constituted of the sum of

A. Saving deposits and time deposit.

B. Narrow money and quasi money

C. Currency in circulation and saving deposits.

D. Currency in circulation and demand deposits.

B. Narrow money and quasi money

69. which of the following instruments monetary policy is expanisionary?

A. An increase in taxes and/or a decrease in government spending.

B. A decrease in taxes and/or an increase in government spending

C. the national Bank of Ethiopia sells government bonds and securities from commercial
banks.

D. the national Bank of Ethiopia buys government bonds and securities from commercial
banks.
D. the national Bank of Ethiopia buys government bonds and securities from commercial
banks.
70. which of the following monetary policy instruments is appropriate when deficit demand
affects an economy?

A. the increase in discount rate.

B. the decrease in discount rare.

C. the increase in cash reserve ratio.

D. the increase in the selling of government securities to commercial banks.

B. the decrease in discount rare.

Item 71 to 75 are attempted by sighted candidates only

71. Consider a production function of the form

Q = K2 L2

Whose marginal product of capital is

MPk = 2KL2

And marginal product of labor is

MPL = 2KL2L

What is the marginal rate of technical substitution of labor for capital at the point where K =
5and L= 5?

A. 5 C. 1
B. 25 D. 50
C. 1

72. When a production function has the form

Q = 𝛼𝐿 + 𝑏𝑘

We are say that

A. The production function is linear and the inputs are perfect substitutes.
B. The production function is non-linear and the inputs are perfect substitutes.
C. The production function is linear and the inputs are perfect complements.
D. The production function is linear and the inputs are used in fixed factor proportions only.

A. The production function is linear and the inputs are perfect substitutes.
73. Assume that the consumer price index (CPI) in 2016 was 220 and in yare 2015 it was 200.
What is the annual CPI inflation rate between the two years?

A. 5%

B. 10%

C. 20%

D. no enough information to answer this question.

B. 10%

74. if the price elasticity of demand for commodity X is -3.0, then

A. 12% drop in price leads to a 4% rise in the quantity demanded.

B. 12% rise in price leads to a 36% rise in the quantity demanded.

C. 12% drop in price leads to a 36% rise in the quantity demanded.

D. $1,000 drop in price leads to a 3,000-unit rise in the quantity demanded.

C. 12% drop in price leads to a 36% rise in the quantity demanded.

75. Assume that cyclical unemployment rate in a country is 4% and the structural unemployment
rate is 6% what is the number of unemployed persons give that labor force in this country
amounts to 100 million?

A. 2 million C. 6 million

B. 4 million D. 10 million

D. 10 million

Item 76 to 80 are to be attempted by visually impaired candidates only.

76. under which of the following sets of circumstances is definitely the case that the average
product increases as more labor is hired?

A. total product increases as more labor is hired.

B. the marginal product is equal to the average product.

 C. the marginal product is less than the average product.

D. the marginal product is greater than the average product.

D. the marginal product is greater than the average product.

77. some countries have wide differences between gross national product (GNP) and gross
domestic product (GDP). Which one of the following can explain the difference?

A. the countries have a large number of citizens working abroad.

B. the countries have a high level of imports and exports relative to GNP.

C. the countries purchase large amounts of military wares from other countries.

D. the countries have a large portion of their GNP produced by multinational

corporations.

A. the countries have a large number of citizens working abroad.

78. according to the population census of Ethiopia of the year 2007, significant proportion of the
country’s population was age 15 or below. Which of the following is NOT among possible
outcomes of that demographic characteristic?

A. that demographic characteristic explains the increased labor supply.

B. that demography characteristic explains the increased youth unemployment today.

C. that demographic characteristic explains the increased aged population of the country
today.

D. the demographic characteristic explains the increased urban youth unemployment

today.
A. that demographic characteristic explains the increased labor supply.

79. An is quant represents all combinations of

A. inputs that cost the same amount.

B. inputs that produce a given level of output.

 C. output that require the same levels of inputs.

D. inputs that produce a given level of output at the same cost.

B. inputs that produce a given level of output.

80. Which component of the Ethiopian government expenditure is the largest?

A. Public debt C. General service.

B. Social service D. Economic service.

C. General service.