2017 E.C. Economics EUEE past paper

Q1 · Aggregate demand determinants

1. A. Availability of credit
2. B. Cost of inputs
3. C. State of technology
4. D. Change in productivity

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Q2 · Government spending and AD

1. A. Aggregate demand shifts to the right increasing both output and price level.
2. B. Aggregate demand shifts to the left increasing both output and price level
3. C. Aggregate demand shifts to the left decreasing output and increasing price level.
4. D. Aggregate demand shifts to the right increasing output but decreasing price level.

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Q3 · Aggregate supply factors

1. A. Higher price of imported raw materials leads to firms to produce more.
2. B. Lower demand for commodities in the market initiates firms to produce more.
3. C. Subsidizing domestic industry in technology leads to decrease production.
4. D. Qualified high managerial ability leads to firms to produce more production.

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Q4 · Short-run aggregate supply curve

1. A. It shows the quantity demanded at different price levels, ceteris paribus.
2. B. It reveals that as price level rises, firms decrease the quantity supplied of goods.
3. C. It shows the quantity supplied of output at various price levels, ceteris paribus.
4. D. It reveals that as price level drops, firms increase the quantity supplied of goods.

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Q5 · Short-run equilibrium

1. A. The occurrence of a shortage of goods leads to firms decrease output and consumption decrease consumption.
2. B. It is the intersection of aggregate demand and aggregate supply.
3. C. The occurrence of a surplus of goods leads to firms decrease output and consumption increase consumption.
4. D. It is the intersection of long-run and short-run aggregate supply curves.

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Q6 · Price adjustment to equilibrium

1. A. At a lower price level, there will be surplus, and the price level decreases.
2. B. At a higher price level there will be shortage, and the price level increases.
3. C. At a lower price level, there will be shortage and the price level rises.
4. D. At a higher price level there will be surplus, and the price level increases

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Q7 · Market failure / externalities

1. A. Taxing the polluting firm
2. B. Subsidizing the polluting firm
3. C. Encouraging the polluting firm
4. D. Renting the polluted river

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Q8 · Free rider problem

1. A. Free ridership is a problem that arises due to the excludable nature of public goods.
2. B. Individuals get the benefits of public goods without contributing anything to the cost.
3. C. All individuals have the incentive to pay for the public good.
4. D. The free rider problem enables the markets operate efficiently for public goods.

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Q9 · Positive externality

1. A. Playing loud music in the neighborhood
2. B. Smoking in public places
3. C. Vaccination program in the neighborhood
4. D. Overgrazing cows in the common pasture lands

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Q10 · Asymmetric information

1. A. buyers and sellers have different types of information.
2. B. buyers and sellers have the same type of information.
3. C. buyers and sellers want to be free riders.
4. D. buyers and sellers lack agreement on the price.

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Q11 · Signaling

1. A. free ride the employer.
2. B. screen the employer.
3. C. create externality for the employer.
4. D. signal to the employer.

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Q12 · Consumer protection

1. A. Consumers often do not exercise their rights.
2. B. Sellers compete with each other aggressively.
3. C. Consumers' interest and business survival are unrelated.
4. D. Consumers have the same information as sellers.

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Q13 · Macroeconomic policy objectives

1. A. Cost minimization
2. B. Income inequality
3. C. Healthy balance of payment
4. D. Profit maximization

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Q14 · Monetary policy tools

1. A. Taxation
2. B. Discount rate
3. C. Transfer payments
4. D. Grants in aid

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Q15 · Home Grown Economic Reform - financial sector

1. A. Reduce the supply of credit to the private sector
2. B. Promote market based interest rate
3. C. Strengthen the capacity of the National Bank of Ethiopia
4. D. Establish and expand capital markets

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Q16 · Fiscal decentralization

1. A. Local externalities
2. B. Inefficient tax system
3. C. Ineffectiveness of redistributing program
4. D. Fostering intergovernmental competition

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Q17 · Population growth and environment

1. A. Rapid population growth reduces disguised unemployment and increases per capita productivity.
2. B. Rapid population growth accompanied by heavy rural-urban migration could lead to urban pollution.
3. C. Rapid population growth leads to capital formation and accelerated rural development due to high propensity to save and invest
4. D. Rapid population growth enables improvement in land to man ratio due to the elastic supply of land.

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Q18 · Rural development

1. A. capital intensive resources
2. B. technology intensive resources
3. C. increasing rural-urban migration
4. D. the utilization of natural resources

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Q19 · Climate change definition

1. A. Persistent variation in the mean state of climate
2. B. A short lived change in the weather from day to day
3. C. A decline in forest coverage through deforestation
4. D. Release of greenhouse gases in to the atmosphere

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Q20 · Income policy

1. A. It stabilizes wages and prices.
2. B. It facilitates money supply.
3. C. It stabilizes the interest rate.
4. D. It encourages reduction of taxes.

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Q21 · Price floor

1. A. The price floor is below the equilibrium price of teff resulting in shortage of teff.
2. B. The price floor is above the equilibrium price of teff resulting in shortage of teff.
3. C. The price floor is below the equilibrium price of teff resulting in surplus of teff.
4. D. The price floor is above the equilibrium price of teff resulting in surplus of teff.

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Q23 · Floating exchange rate

1. A. Correction of balance of payments deficits
2. B. Protection from external shocks
3. C. Governments are free to pursue other policies
4. D. Instability and uncertainty facing firms and consumers

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Q24 · Exchange rate terminology

1. A. Depreciation
2. B. Devaluation
3. C. Appreciation
4. D. Revaluation

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Q25 · Definition of taxation

1. A. It is payment made to government to obtain direct benefit in return.
2. B. It is the compulsory, unrequited payments to general government.
3. C. It is payments that individuals make to government if they want.
4. D. It is the only source of revenue for the government for personal use.

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Q26 · Objectives of taxation

1. A. Stabilizing the economy
2. B. Minimizing income equalities
3. C. Encouraging import
4. D. Reducing regional balance

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Q27 · Sin tax

1. A. Encouraging administrative efficiency
2. B. Encouraging consumption
3. C. Reducing consumption
4. D. Stabilizing the economy

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Q28 · Tax incidence

1. A. It relates to the way the burden of tax is distributed among economic units.
2. B. It points out who is illegally responsible for paying the tax from the income.
3. C. It is imposing high taxes on high-income earners without any consideration.
4. D. It is the way of discouraging low-income earners from paying taxes.

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Q29 · Good tax system

1. A. It creates income inequalities.
2. B. It is complex and financially inelastic.
3. C. It enables optimum allocation of resources.
4. D. It is narrow based-tax and is levied only on income.

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Q30 · Focus of macroeconomics

1. A. Profit maximization of a corporation
2. B. The growth of a firm in the economy
3. C. Cost minimization of a specific company
4. D. Inflation caused by different factors

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Q31 · Macro vs micro economics

1. A. Studying about the performance of individual firm
2. B. Studying about the behavior of the aggregate economy
3. C. Analyzing about the actions of individual company
4. D. Focusing on the specific price of products

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Q32 · Macroeconomic challenges

1. A. Income and consumption pattern of a given household
2. B. The total amount of laborers hired by a given industry
3. C. The amount of profit earned by a given firm
4. D. The number of unemployed people in a given country

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Q33 · Balance of trade

1. A. gross domestic product and gross national product.
2. B. private and public businesses and transfers.
3. C. trade surplus and trade deficit.
4. D. export and import earning from goods and services.

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Q34 · History of macroeconomic thought

1. A. Monetarist
2. B. Classical
3. C. Keynesian
4. D. New Keynesian

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Q35 · Classical theory

1. A. Fiscal policy is useful to influence output.
2. B. Recession is a temporary phenomenon.
3. C. Monetary policy can influence output.
4. D. There is a need of cutting government spending.

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Q36 · Nominal rigidities

1. A. The new Classical
2. B. Keynesian
3. C. The classical
4. D. The monetarist

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Q37 · Monetarist vs Keynesian

1. A. Keynesians argued that aggregate demand is always automatically high.
2. B. Monetarists argued that fiscal policy addresses macroeconomic problems.
3. C. Keynesians argued that monetary policy stimulates aggregate demand.
4. D. Monetarist argued that monetary policy addresses macroeconomic problems.

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Q39 · Consumption function factors

1. A. Expectation of a lower future income increases consumption.
2. B. Decreases in wealth lead to increase in consumption.
3. C. Increases in interest rate increases consumption.
4. D. Increases in income taxes decreases consumption.

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Q40 · Fiscal policy

1. A. Exchange rate policy
2. B. Monetary policy
3. C. Fiscal policy
4. D. Property rights policy

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Q42 · Role of fiscal policy

1. A. Increasing people's income by increasing taxes
2. B. Increasing government expenditure to solve recession
3. C. Solving trade deficit by increasing imports
4. D. Increasing government expenditure to control inflation

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Q43 · Monetary policy and AD

1. A. Lowering interest rate decreases aggregate demand.
2. B. Increasing the discount rote increases aggregate demand.
3. C. An increase in money supply decreases aggregate demand.
4. D. An increase in money supply increases aggregate demand.

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Q44 · Macroeconomic policy issue

1. A. Maximizing firm's profit
2. B. Controlling inflation
3. C. Encouraging firm's competition
4. D. Restructuring the market

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Q45 · National long-term plan 2021-2030

1. A. Expanding access to education and health services and achieving MDGs
2. B. Launching strategy of Agricultural Development Led Industrialization
3. C. Maintaining macroeconomic stability, ensuring rapid sustainable economic growth and creating decent job
4. D. Speed up and catalyze transformation of the domestic private sector and render them a capable development force

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Q47 · GTP I and II challenges

1. A. Sluggish structural transformation and weak sectorial linkages
2. B. Actual growth performance was higher than the annual target rate.
3. C. The contribution of the service sector to the overall GDP was the highest.
4. D. The contribution of each sector to the overall economy was uniformly low.

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Q48 · Ten-year development plan pillars

1. A. Building regional monopoly power and economy
2. B. Quality economic growth and shared prosperity
3. C. Public sector-led economic growth
4. D. Gender and social exclusion

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Q49 · Home Grown Economic Reform objectives

1. A. Encouraging debt vulnerabilities.
2. B. Creating inadequate job opportunities
3. C. Transition from private to public sector-led growth
4. D. Maintaining macroeconomic stability

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Q50 · Weather definition

1. A. It is unpredictable atmospheric conditions.
2. B. It is short-term atmospheric conditions.
3. C. It is rainy season occurs for long period of time.
4. D. It is long-term atmospheric conditions.

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Q51 · Global warming and climate change

1. A. Greenhouse gases raise atmospheric temperatures and produce other changes in the climate system.
2. B. Global warming is unrelated to human activities emitting greenhouse gases
3. C. There is no link between economic activity and energy emission through the green house effect.
4. D. Burning of fossil fuels and reductions of forests that sink carbon dioxide decreases green house gases.

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Q52 · Environmental degradation and growth

1. A. Improvement of food security due to length of growing seasons in arid areas
2. B. Long-term changes influencing agriculture, water, health and other sectors
3. C. Use of biologically renewable resources and renewable physical stock
4. D. Improvement in the economic well-being of the rural people

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Q53 · Mitigation strategy

1. A. Subsidizing the use of fossil fuels
2. B. Reducing the role of indigenous communities
3. C. Destabilizing greenhouse gases
4. D. Reducing the release of carbon dioxide (CO2)

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Q54 · Cause of global warming

1. A. Green growth strategies
2. B. Mitigation policies
3. C. Greenhouse gases
4. D. Carbon taxes

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Q55 · Mitigation strategy characteristics

1. A. It adjusts to the potential impacts of climate change.
2. B. It emits the same amount of pollution across all countries.
3. C. It involves long-term limits on the amount of greenhouse emissions.
4. D. It intensives use of non-renewable resources of energy.

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Q56 · Green economy

1. A. It is characterized by loss of biodiversity and ecosystem services.
2. B. It emits higher percentage of greenhouse gas than other economies.
3. C. It uses high carbon, is resource inefficient and socially exclusive.
4. D. It reduces environmental risk and ecological scarcity to improve well-being.

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Q57 · Renewable energy

1. A. Solar energy
2. B. Fossil fuel energy
3. C. Wind energy
4. D. Thermal energy

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Q58 · Green growth

1. A. It relies on eroding the natural capital.
2. B. It is a carbon intensive growth strategy.
3. C. It employs renewable energy and low carbon.
4. D. It exacerbates environmental related risks.

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Q59 · Ethiopia climate vulnerability

1. A. High population growth
2. B. Dependence on rain-fed agriculture
3. C. Carbon emission from rapid industrialization
4. D. Poor water resource development

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Q60 · Tax equity approaches

1. A. The benefits approach
2. B. The ability to pay approach
3. C. The approach Bansed on vertical equity
4. D. The approach based on horizontal equity

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Q61 · Ethiopian tax system

1. A. The regional governments are solely responsible for tax collection.
2. B. The federal government is solely responsible for tax collection.
3. C. The federal and regional governments share tax revenue and manage their budgets.
4. D. The federal government levies taxes on behalf of the regional governments.

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Q62 · Turnover tax

1. A. A tax levied on persons unregistered for value added tax.
2. B. A tax imposed on goods that are hazardous to harmful products.
3. C. A tax levied on the values added at every stage.
4. D. A tax imposed on income from employment.

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Q63 · Tax evasion

1. A. Falsifying information on tax return to reduce one's tax liability
2. B. Taking full advantage of tax provisions to reduce one's tax obligations
3. C. Paying the same share of tax regardless of income
4. D. The degree of complexity in the tax administration system

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Q64 · Multidimensional poverty

1. A. It is based on a single dimension.
2. B. It is adequately measured with income.
3. C. It only measures quantitative related difference.
4. D. It depends on several related deprivations.

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Q66 · Relative poverty

1. A. Poverty headcount index
2. B. Absolute poverty
3. C. Relative poverty
4. D. Multidimensional poverty

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Q67 · Absolute poverty

1. A. The comparison of an individual to other people's standing in the economy
2. B. The situation of someone being unable to meet the subsistence basic needs
3. C. The explanation of matter of failure of distributive justice
4. D. The description of an individual able to command sufficient resources

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Q68 · Income distribution

1. A. Social inequality of community
2. B. Size distribution of income
3. C. Functional distribution of income
4. D. Factor share distribution of income

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Q69 · Women in development

1. A. Women have stable sources of income.
2. B. Women's earning potential is higher.
3. C. Intra-household resource allocation favors women.
4. D. Women are much less likely to be in formal jobs.

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Q70 · Poverty reduction country example

1. A. China
2. B. Eritrea
3. C. India
4. D. Bangladesh

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Q71 · Poverty in Sub-Saharan Africa

1. A. The majority of people on less than $1.90 a day live in the region.
2. B. The region experienced significant reduction in poverty in the past 50 years.
3. C. The region has managed to escape the problem of poverty.
4. D. The region has lifted millions of citizens out of poverty in the last decade.

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Q72 · Cottage industries

1. A. It employs capital intensive techniques.
2. B. It has insignificant contribution to economies.
3. C. It offers self-development exclusively for women.
4. D. It employs labor intensive techniques.

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Q75 · Unemployment calculation

1. A. 2.2 million
2. B. 220 million
3. C. 20 million
4. D. 22 million

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Q77 · Gini coefficient

1. A. 0.4
2. B. 0.6
3. C. 0.2
4. D. 0.3

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Q78 · Labor force participation rate

1. A. 66%
2. B. 7%
3. C. 11%
4. D. 60 %

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Q79 · Inflation rate calculation

1. A. 13%
2. B. 30%
3. C. 10%
4. D. 23%

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