NABTEB Economics Past Questions And Answers (Objective and Theory)

 

Section A: Multiple Choice Questions

 

Question: What is the difference between absolute advantage and comparative advantage?

a) Absolute advantage focuses on the total output, while comparative advantage considers opportunity costs.

b) Comparative advantage is based on technological advancements, while absolute advantage relies on labor productivity.

c) Absolute advantage is only applicable in international trade, while comparative advantage is relevant domestically.

d) Comparative advantage emphasizes specialization, while absolute advantage emphasizes diversification.

Answer: a) Absolute advantage focuses on the total output, while comparative advantage considers opportunity costs.

Question: Which type of unemployment results from a mismatch between the skills of the workforce and the requirements of available jobs?

a) Frictional unemployment

b) Structural unemployment

c) Cyclical unemployment

d) Seasonal unemployment

Answer: b) Structural unemployment

Question: What is the difference between a progressive tax and a proportional tax?

a) Progressive taxes take a higher percentage of income from high-income earners, while proportional taxes apply the same rate to all income levels.

b) Progressive taxes take a higher percentage of income from low-income earners, while proportional taxes apply the same rate to all income levels.

c) Progressive taxes have a decreasing rate structure, while proportional taxes have a flat rate.

d) Progressive taxes have a flat rate, while proportional taxes have a decreasing rate structure.

Answer: a) Progressive taxes take a higher percentage of income from high-income earners, while proportional taxes apply the same rate to all income levels.

Question: Which economic indicator measures the total value of goods and services produced within a country’s borders over a specific time period?

a) Gross Domestic Product (GDP)

b) Consumer Price Index (CPI)

c) Unemployment rate

d) Inflation rate

Answer: a) Gross Domestic Product (GDP)

Question: In the context of monetary policy, what is the federal funds rate?

a) The interest rate at which commercial banks lend money to the central bank

b) The interest rate at which commercial banks lend money to each other overnight

c) The interest rate set by the central bank for all loans in the economy

d) The interest rate on long-term government bonds

Answer: b) The interest rate at which commercial banks lend money to each other overnight

Question: What is a budget deficit?

a) When government spending exceeds tax revenue in a given period

b) When tax revenue exceeds government spending in a given period

c) The total amount of government debt

d) The surplus in the government’s budget

Answer: a) When government spending exceeds tax revenue in a given period

Question: Which of the following is a characteristic of a command economy?

a) Decentralized decision-making

b) Private ownership of resources

c) Market-driven prices

d) Centralized planning by the government

Answer: d) Centralized planning by the government

Question: What is the function of the World Health Organization (WHO)?

a) Regulate global monetary policy

b) Facilitate international trade negotiations

c) Provide financial assistance to developing countries

d) Promote global health and coordinate international health efforts

Answer: d) Promote global health and coordinate international health efforts

Question: Define the term “elasticity of demand.”

a) The responsiveness of quantity supplied to a change in price

b) The responsiveness of quantity demanded to a change in price

c) The proportion of income spent on a good

d) The ratio of consumer surplus to producer surplus

Answer: b) The responsiveness of quantity demanded to a change in price

Question: Which market structure is characterized by a few large sellers, differentiated products, and barriers to entry?

a) Perfect competition

b) Oligopoly

c) Monopoly

d) Monopolistic competition

Answer: d) Monopolistic competition

 

Section B: Theory Questions

 

Question: Discuss the concept of inflation and its effects on an economy.

 

Answer: Inflation is the sustained increase in the general price level of goods and services over time. While moderate inflation can stimulate economic activity, hyperinflation can erode purchasing power and disrupt economic stability.

Question: Explain the concept of a market externality and provide an example.

 

Answer: A market externality occurs when the production or consumption of a good affects third parties not directly involved in the transaction. For example, pollution emitted by a factory impacting the health of nearby residents is a negative externality.

Question: Describe the role of the labor force participation rate in measuring unemployment.

 

Answer: The labor force participation rate measures the proportion of the working-age population actively engaged in the labor market, including both employed and unemployed individuals. It helps gauge the extent of unemployment in relation to the total potential workforce.

Question: Discuss the impact of technological advancements on productivity and economic growth.

 

Answer: Technological advancements can significantly enhance productivity by improving efficiency and creating new opportunities. This, in turn, contributes to economic growth as nations harness innovation to increase output and competitiveness.

Question: Explain the concept of monetary policy transmission mechanisms.

 

Answer: Monetary policy transmission mechanisms describe how changes in monetary policy, such as interest rate adjustments, influence various economic variables like consumption, investment, and inflation. Channels include the interest rate channel, credit channel, and exchange rate channel.