26. Which THREE would shift the demand curve for a normal good to the right? (Select THREE.)

Multiple response
A) A fall in the price of the good itself
B) A rise in the price of a substitute
C) A rise in household income
D) A rise in the price of the good itself
E) A favourable change in consumer tastes
F) A rise in the price of a complement

Correct: B, C, E difficult Shifts in demand

Income, substitute prices and tastes shift demand. A change in the good's own price is a movement along the curve, and a rise in the price of a complement shifts demand to the left.

27. Which TWO would shift the supply curve to the right? (Select TWO.)

Multiple response
A) A rise in the price of the good itself
B) Higher wages
C) An increase in the rate of tax on output
D) A technological improvement
E) A fall in input costs

Correct: D, E difficult Shifts in supply

Lower costs and better technology shift supply right. The good's own price causes a movement along the curve.

28. Which THREE are costs of high inflation to businesses? (Select THREE.)

Multiple response
A) Menu costs of changing prices
B) Guaranteed profit growth
C) Uncertainty in planning and pricing
D) Lower wage demands
E) Erosion of the real value of fixed receipts
F) Certainty over future costs

Correct: A, C, E difficult Effects of inflation

Inflation creates uncertainty, costs of repricing and reduces the real value of fixed receipts.

29. Which TWO are tools of monetary policy? (Select TWO.)

Multiple response
A) Quantitative easing
B) Changing government spending
C) Changing income tax rates
D) Changing the minimum wage
E) Changing interest rates

Correct: A, E difficult Monetary policy

Monetary policy uses interest rates and operations such as quantitative easing. Taxes and spending are fiscal policy.

30. Which TWO are tools of fiscal policy? (Select TWO.)

Multiple response
A) Changing government spending
B) Quantitative easing
C) Open market operations
D) Changing tax rates
E) Changing interest rates

Correct: A, D difficult Fiscal policy

Fiscal policy uses taxation and public spending.

31. Which THREE are typical effects of a recession on businesses? (Select THREE.)

Multiple response
A) Increased bad debts
B) Rising consumer confidence
C) Falling demand
D) Rapid job creation
E) Pressure on profits
F) Higher investment

Correct: A, C, E difficult Recession effects

Recession reduces demand and profits, and increases customer failures and bad debts.

32. A single state-licensed company is the only supplier of piped gas in a Chattogram district. Which THREE features of monopoly are most likely to be present? (Select THREE.)

Multiple response
A) Lower output and higher price than under competition
B) Ability to influence price
C) Many close substitutes supplied by rivals at the same price
D) Price taking behaviour
E) Barriers to entry created by the licence

Correct: A, B, E difficult Features of monopoly

A licensed sole supplier faces no entry, can influence price and typically restricts output relative to competition. Price taking and many suppliers describe perfect competition.

33. A polluting steel plant imposes costs on nearby residents that are not reflected in its prices. Which TWO government actions address this negative externality? (Select TWO.)

Multiple response
A) A minimum price for steel
B) A subsidy for each tonne of steel produced
C) A tax on emissions
D) A legal limit on permitted emissions
E) Removing all environmental inspections

Correct: C, D complex Government intervention

A corrective tax or a regulatory limit makes the producer bear or reduce the external cost. A subsidy or minimum price would increase output, and removing inspections would worsen the problem.

34. An economy is in the boom phase of the business cycle. Which TWO conditions would you expect? (Select TWO.)

Multiple response
A) High utilisation of capacity and rising investment
B) Upward pressure on prices and wages
C) Rising unemployment
D) Widespread business failures
E) Falling consumer confidence

Correct: A, B complex Business cycle

In a boom, demand is strong, capacity is stretched, and wages and prices tend to rise. Rising unemployment, falling confidence and business failures are typical of recession or depression.

35. A 10% price rise reduces quantity demanded by 5%. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Demand is price elastic.   No

2. Total revenue rises.   Yes

3. Price elasticity of demand is 0.5.   Yes

4. Total revenue falls.   No

Correct: N, Y, Y, N complex Elasticity

(1) No. (2) Yes: demand is inelastic, so the price rise outweighs the fall in quantity. (3) Yes: 5 / 10 = 0.5. (4) No.

36. Consider inflation and interest rates. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Cost-push inflation is cured simply by cutting aggregate demand with no other effects.   No

2. Higher interest rates can reduce demand-pull inflation.   Yes

3. Deflation always benefits businesses.   No

4. Inflation reduces the real burden of fixed-rate debt for borrowers.   Yes

Correct: N, Y, N, Y difficult Inflation

(1) No: reducing demand may cut output and jobs. (2) Yes. (3) No. (4) Yes.

37. A maximum price is set below the equilibrium price. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Supply increases.   No

2. Demand exceeds supply.   Yes

3. The price rises to the equilibrium level.   No

4. Quality may fall.   Yes

Correct: N, Y, N, Y difficult Maximum prices

(1) No. (2) Yes. (3) No: the maximum price prevents the rise. (4) Yes.

38. Consider market structures. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. In perfect competition firms are price takers.   Yes

2. In an oligopoly firms are interdependent.   Yes

3. In monopolistic competition products are identical.   No

4. In a monopoly there are no barriers to entry.   No

Correct: Y, Y, N, N difficult Market structures

(1) Yes. (2) Yes. (3) No: products are differentiated. (4) No.

39. The economy enters a recession. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Government infrastructure spending is fiscal policy.   Yes

2. Supply-side policy works primarily by raising demand.   No

3. Cutting taxes is an expansionary fiscal policy.   Yes

4. Quantitative easing aims to increase liquidity.   Yes

5. Raising interest rates is expansionary monetary policy.   No

Correct: Y, N, Y, Y, N difficult Policy in a recession

(1) Yes. (2) No. (3) Yes. (4) Yes. (5) No.

40. Consider GDP. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. GDP measures the value of output.   Yes

2. GDP growth guarantees that every business benefits.   No

3. Nominal GDP cannot rise while real GDP falls.   No

4. Real GDP growth is approximately nominal growth less inflation.   Yes

Correct: Y, N, N, Y difficult GDP

(1) Yes. (2) No. (3) No: if inflation exceeds nominal growth, real GDP falls. (4) Yes.

41. A bakery raises the price of a cake from Tk 50 to Tk 54, and monthly sales fall from 1,000 to 880 cakes. What is the price elasticity of demand (ignoring sign) and what happened to revenue?

A) 1.5, so demand is elastic and revenue rose from Tk 50,000 to Tk 52,000
B) 1.5, so demand is elastic and revenue fell from Tk 50,000 to Tk 47,520
C) 0.67, so demand is inelastic and revenue rose from Tk 50,000 to Tk 52,000
D) 0.67, so demand is inelastic and revenue fell from Tk 50,000 to Tk 47,520

Correct: B complex Price elasticity of demand

Price rose 8% and quantity fell 12%, so PED = 12/8 = 1.5, which is elastic. Revenue fell from 50 × 1,000 = 50,000 to 54 × 880 = 47,520.

42. When the price of brand B tea rises by 10%, the quantity demanded of brand A tea rises by 6%. What is the cross elasticity of demand and what does it show?

A) −0.6, showing that A and B are complements
B) +0.6, showing that A and B are complements
C) +0.6, showing that A and B are substitutes
D) +1.7, showing that A and B are unrelated goods

Correct: C difficult Cross elasticity

XED = %ΔQ of A ÷ %ΔP of B = 6/10 = +0.6. A positive value means the goods are substitutes.

43. Household income rises by 5% and demand for a certain food rises by 2%. Another good shows a 9% rise in demand. What do the two results show?

A) The first good is an inferior good with YED 0.4 and the second is a normal necessity with YED 1.8
B) The first good is a luxury with YED 2.5 and the second is a necessity with YED 0.56
C) The first good is a normal necessity with YED 0.4 and the second is a luxury with YED 1.8
D) Both goods are inferior goods because demand has risen by less than 10% in each case

Correct: C difficult Income elasticity

YED = %ΔQ ÷ %Δincome: 2/5 = 0.4 (positive, below 1, necessity) and 9/5 = 1.8 (above 1, luxury). Inferior goods have negative YED.

44. The government raises spending by Tk 20bn. The marginal propensity to consume is 0.75, and there are no taxes or imports. What is the multiplier and total increase in income?

A) 1.33, so the total increase in national income is Tk 26.7bn
B) 4, so the total increase in national income is Tk 80bn
C) 0.25, so the total increase in national income is Tk 5bn
D) 3, so the total increase in national income is Tk 60bn

Correct: B complex Fiscal multiplier

Multiplier = 1/(1 − MPC) = 1/0.25 = 4. Total = 20 × 4 = 80. Leakages from tax or imports would reduce it.

45. Nominal GDP rises from Tk 8,000bn to Tk 8,900bn while the GDP deflator rises by 7%. What is the approximate growth in real GDP?

A) About 7.0%
B) About 11.3%
C) About 18.3%
D) About 4.0%

Correct: D difficult Real GDP

Nominal growth = 900/8,000 = 11.25%. Real growth = 1.1125/1.07 − 1 = 4.0%. The unadjusted figure is 11.3%.

46. A monopolist faces the demand curve P = 100 − 2Q and has constant marginal cost of Tk 20. What are the profit-maximising price and output?

A) Output 25 units and price Tk 50, where average revenue equals marginal cost
B) Output 20 units and price Tk 60, where marginal revenue equals marginal cost
C) Output 20 units and price Tk 20, where marginal revenue is zero, which is the competitive outcome and not the monopolist's profit-maximising position
D) Output 40 units and price Tk 20, where price equals marginal cost

Correct: B complex Monopoly

MR = 100 − 4Q. Set equal to MC 20: Q = 20, price = 100 − 40 = 60. Competitive output would be where P = MC (Q = 40).

47. A per-unit tax is imposed on a good for which demand is very inelastic and supply is relatively elastic. Who bears more of the tax burden and why?

A) Producers and consumers bear it equally, because the legal incidence determines the economic burden
B) Neither bears it, because the tax is absorbed by the government through lower spending
C) Consumers bear most of it, because they have few alternatives and cannot reduce purchases much when price rises
D) Producers bear most of it, because they are unable to adjust the quantity supplied when the price changes, and the government would therefore receive almost no tax revenue from the good

Correct: C difficult Tax incidence

The side with the less elastic curve bears more. Inelastic demand means consumers pay most of the tax.

48. The government sets a minimum price of rice above the equilibrium price. What is the likely result and what is a usual government response?

A) A surplus because supply exceeds demand, which the government may buy or store to maintain the price
B) A shortage because demand exceeds supply, which the government may remove by lowering the price, which would be the usual outcome if the price had been set below the equilibrium level
C) A black market in rice, because buyers cannot obtain enough at the legal price
D) No effect on the market, because minimum prices below the equilibrium price are never binding

Correct: A difficult Minimum price

A binding minimum price creates excess supply. The government may buy the surplus. Shortages and black markets arise from maximum prices.

49. A bank pays 9% interest on a deposit while inflation is 6%. What is the approximate real interest rate and what does it imply for a saver's purchasing power?

A) About 2.8%, so the saver's purchasing power rises slightly
B) About 3.0% but purchasing power falls because inflation is positive
C) About 15%, so the saver's purchasing power rises sharply
D) About −3%, so the saver's purchasing power falls by that amount

Correct: A difficult Real interest rate

Exact real rate = 1.09/1.06 − 1 = 2.8% (about 3% by the approximation). Positive real rate means purchasing power increases.

50. The taka falls from Tk 110 to Tk 120 per US dollar. What is the effect on importers and exporters, other things being equal?

A) Imports become more expensive in taka and exports cheaper in dollars, which tends to help exporters
B) Imports and exports are both unaffected because only investors are exposed to rates
C) Imports become cheaper in taka and exports dearer in dollars, which tends to help importers, so exporters would face a more difficult position than before the change in the rate
D) Imports become more expensive in taka and exports dearer in dollars, which helps no one

Correct: A difficult Exchange rates

A weaker taka raises the taka price of imports and lowers the dollar price of exports.