Model Exit Exam: Economics May 2024
Addis Ababa University
College of Business And Economics
Department of Economics
Model Exit Exam: Economics
Instructions!
1. This model exam is prepared by the department of economics to assist you in
preparing for the exit exam.
2. The Model Exam contains 100 multiple choice questions from courses that you
have taken during your undergraduate stay.
3. Write your full name on the space given below and on the answer sheet.
4. The exam booklet has 21 pages including the cover page and answer sheet.
5. Switch off your mobile phone. Using a mobile phone for any purpose is
strictly forbidden.
6. Sharing calculators is not allowed.
7. Do not mark any answer on the question paper. Put your answers on the answer
sheet only.
8. There is no excuse for any attempt to cheat. It entails serious penalty.
GOOD LUCK!
Student Personal Details:
Name: _____________________________________
ID. No. ___________
Section: _________
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Model Exit Exam: Economics May 2024
Choose the best answer from the suggested options and write the letter of your choice
ONLY on the answer sheet.
a b
1) Consider the utility function, u( x , y )=x y ,where x and y are quantities of the two goods
and a and b are positive constants. Which of the following is true about the relationship
between x and y in consumption?
A) x and y are perfect substitutes
B) x and y are perfect complements
C) x and y are imperfect substitutes
D) the consumer prefers consumption of more x than y
2) For a consumer purchasing two commodities (X. Y), if the prices of X and Y double and so
does the consumer’s money income, we can deduce that his budget line will.
A) Shift in but remain parallel to the old one.
B) Shift out but remain parallel to the old one.
C) Rotates in ward so that the slope of the budget constraint is doubled.
D) Remain unchanged.
3) Which one of the following is false about a Giffen good?
A) Its demand function slopes upward
B) Its income effect outweighs substitution effect
C) It has a positive income elasticity of demand
D) It is an inferior good
4) In economic theory, the economy has reached Pareto Optimality when
A) society’s initial endowment is distributed equally among all individuals
B) no one can be made better off without making someone else worse off
C) society’s initial endowment is distributed fairly among all individuals
D) every firm is enjoying a profit
5) You are consuming two goods x and y by spending your entire income and you observe that
at current levels of consumption MUx /Px=7 while MUy / Py=15. In order to maximize
utility, you should
A) continue to consume the same amount of x and y since you are already maximizing
utility
B) consume less of both x and y
C) consume more x and less y
D) consume less x and more y
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Model Exit Exam: Economics May 2024
u( w)=4 +ln W
6) Suppose that a consumer’s utility function is given by where w represents
total wealth of the consumer. Then, the attitude of the consumer towards risk can be
characterized as
A) Risk neutral
B) Risk verse
C) Risk loving
D) Impossible to determine from the information given
7) Suppose you multiply all your factors of production by a constant t>1 and you observe the
following relationship: F(tL,tK)<tF(L,K). this observation can make you conclude that
A) The average costs of production are falling
B) There are decreasing returns to scale
C) The marginal products of L and K are increasing
D) There are increasing returns to scale
8) The isoquants of two-input production function where inputs are perfect substitutes are
A) L-shaped
B) Straight lines
C) Convex to the origin
D) Concave to the origin
9) If a firm finds itself operating in stage I of production,
A) It can increase its profits by decreasing input use
B) It can increase its profit by increasing input use to the point where marginal product
of labour is zero.
C) It can increase its profits by moving to stage II
D) It should stay in stage I because marginal product is increasing
10) Which one of the following is not true about short-run cost curves?
A) Marginal cost(MC) equals average variable cost (AVC) at zero unit of output
B) MC equals average cost (AC) and AVC at their respective minimum points
C) TFC is greater than TVC at zero unit of output
D) The distance between AC and AVC is constant
11) Which one of the following is not true about short-run cost curves?
A) Marginal cost(MC) equals average variable cost (AVC) at zero unit of output
B) MC equals average cost (AC) and AVC at their respective minimum points
C) TFC is greater than TVC at zero unit of output
D) The distance between AC and AVC is constant
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Model Exit Exam: Economics May 2024
12) Which of the following is NOT a condition necessary for price discrimination to occur?
A) The firm has a degree of market power
B) The market should contain sub-markets with different price elasticities of demand
C) There should be no resale from a low price market to high price market
D) The firm must produce differentiated products
13) The market type known as perfect competition is
A) almost free from competition and firms earn large profits.
B) highly competitive and firms find it impossible to earn an economic profit in the long run.
C) dominated by aggressive advertising campaigns.
D) marked by firms continuously trying to change their products so that consumers prefer their product
to their competitors' products.
14) A monopolist charges a higher markup in a market where
A. demand is highly price elastic
B. demand is less price elastic
C. demand is perfectly elastic
D. demand is highly sensitive to price changes
15) Two firms operate in joint profit maximizing cartel and the demand they face estimated as P
= 60 - 2Q, where Q = Q1 + Q2. Firm 1’s total cost function is C1 = Q21 and Firm 2’s total cost
function is C2 = 4Q2. How much output will each frim produce to maximize industry profit.
A) Q1 = 2 and Q2 =12
B) Q1= 60 and Q2 = 56
C) Q1 = 4 and Q2 = 4
D) Q1 = 6 and Q2 = 4
16) If the extra output that is produced by hiring one more unit of labor adds more to ________
than to ________, the firm will increase its profit by increasing the use of labor.
A) Total cost; total revenue
B) Total revenue; total cost
C) Marginal cost; marginal revenue
D) Marginal product; marginal cost
17) Suppose you are covered under health insurance and you are insured against all or most of
the costs of visits to the doctor. As a result you are likely to make greater use of medical
services of all kinds. This tendency of people with insurance to change their behavior in a
way that leads to more claims against the insurance company is called:
A) Moral Hazard
B) Signaling
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Model Exit Exam: Economics May 2024
C) Adverse selection
D) Screening
18) In a Pareto efficient equilibrium:
A) There is a fair distribution of income.
B) trying to make someone better off will make someone else better off.
C) trying to make someone better off will make someone else worse off.
D) governments collect some tax revenue.
19) Which one of the following is true?
a) If government wants to increase employment, it can always use expansionary monetary
policy.
b) Monetarist school of thought argues that the use of monetary policy as against fiscal
policy often ensures macroeconomic stability.
c) The New Classical school of thought argues that economic agents make rational
expectation; economies are inherently stable and thus no need of discretionary
government power on economic decisions.
d) New Keynesian school of thought argues that since economic agents are rational there
is no need for government interventions.
20) What do economists understand by the concept of “money neutrality”?
(a) Prices are flexible so that policy changes in the monetary sector does not have any effect
on real economic variables
(b) Monetary policy changes affect real values and not nominal values.
(c) Monetary policy change affects both money market equilibrium and product market
equilibrium.
(d) Monetary policy change helps to address unemployment but cause inflation
21) One of the following is not an assumption of the Keynesian school of thought for
governments to take fiscal and monetary policy actions in an economy
A) To address macroeconomic problems such as inflation and unemployment
B) To boost economic growth
C) Because market forces may not address all types of macroeconomic problems
D) Development requires disequilibrium and fiscal and monetary policy measures help to
create the state of disequibrium.
22) Which of the following is not an example of a transfer payment in the sense of the national
income accounts?
A) Family allowances given for civil servants
B) Public unemployment insurance benefits
C) Dividends paid by corporations to stockholders
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Model Exit Exam: Economics May 2024
D) Disability pensions paid from the social insurance system
23) Comparison of the wellbeing of citizens of different countries is very difficult but some
indicators may be better than others. Which do think is a better measure?
A) Real Gross Domestic Product
B) Real Gross National Product
C) Per capita real GDP
D) Per capita real GDP calculated based on purchasing power parity
24) Which one of the following is true about a typical business cycle?
A) Boom is characterized by high rate of growth of employment and output.
B) Expansion is characterized by high level of output and employment.
C) Recession is characterized by low level of unemployment, low level of output growth
and low level of interest rate.
D) Boom is characterized by an increase in inflation, high level of employment, high
level of output and low rate of growth of the economy.
14. One of the following does not directly affect the product market equilibrium?
A) Change in autonomous tax collection.
B) Change in government transfer.
C) Change in government spending.
D) Change in money supply.
25) If government wants to increase the tax rate with the intention of collecting more taxes, what
possible accompanying measure should government take to maintain equilibrium level of
income to be constant?
A) Reduce government spending
B) Increase money supply
C) Increase household consumption expenditure
D) Increase household saving
26) Tax collection function equals T = tY, where t is tax rate and Y is income. Government
multiplier is αg . What condition should be satisfied for the economy to have a balanced
budget at any given time regardless of expansionary and contractionary fiscal policy
measure?
A) t = 1/ αg
B) t = αg
C) Change in tax revenue equals the tax rate times change in government spending
D) Budget deficits increases by change in government spending
27) Which one of the following is not true about the monetary and fiscal policy measures?
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Model Exit Exam: Economics May 2024
A) In the vertical segment of the LM curve, the economy is in its full employment level;
thus expansionary fiscal policy will lead to private investment crowd-out.
B) In the state of liquidity trap, an increase in money supply will boost the economy.
C) In the upward sloping segment of the LM curve, expansionary fiscal policy causes a
decline in private investment but still output increases.
D) The effect of expansionary monetary policy on the economy depends on the
responsiveness of speculative demand to interest rate.
28) Which of the following statement is true about exchange rate regimes?
A) Floating exchange rates allows monetary policy to pursue goals such as the
stability of prices and employment.
B) Exchange rate uncertainty in floating exchange rates is higher
C) Exchange rate uncertainty in fixed exchange rates is lower since it disciplines the
monetary authority
D) Monetary policy can be used to pursue policy goals other than maintaining the
exchange rate under fixed exchange rates
29) In the Mundell-Fleming model, with a floating exchange rate, an increase in taxes leads to
A) A shift of an IS curve to the right
B) A shift of the LM curve to the left
C) A fall in the exchange rate while aggregate income remains unchanged
D) A decrease in the trade balance
30) Suppose an open economy is characterized by the following equations:
C = c0 + c(Y – T)
I = β0 + β1Y
IM = mY
X = xY*
Assume that the real exchange rate is fixed at a value of 1 and treat foreign income, Y*, as fixed.
Also assume that taxes are fixed and that government purchases are exogenous. The parameters
have the usual meaning.
Suppose government purchases increase by one unit, what is the level of the output multiplier?
A) 1/(1-c-β1+m).
B) 1/(1-c).
C) 1-c/(1-c-β1).
D) 1/(1-c+m).
31) A key assumption of the Life-Cycle hypothesis is that
A) The consumption demands are naturally higher when people are old or when
young.
B) People try and avoid fluctuations in their consumption
C) People earn some disposable income in a given year
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Model Exit Exam: Economics May 2024
D) The elderly, and others, will not completely run down their accumulated savings
32) Closing the educational gender gap by expanding educational opportunities for women is
expected to have __________________ in most developing countries.
A) lower impact on breaking the vicious circle of poverty
B) weaker rate of return, lower labor force participation, and higher fertility
C) higher rate of return, and greater labor force participation
D) deterioration of child health and nutrition because of focus on unnatural food
33) Which one of the following best describes the relationship between supply of educational
quality, educational quantity, and employment in developing countries
A) Demand for education and employment is economically motivated while supplies of
education is politically responsive.
B) Market supply of education is led by market demand for education.
C) economically motivated supply of education faces politically responsive demand for
education.
D) Market demand for education is led by market supply of education
34) In several developing countries, observations of massive additions to the urban labor force
are accompanied by failure of this labor force to show up in the formal unemployment
statistics in the modern-sector. This is most likely indicative of
A) The expansion of the urban formal sector absorbing the rural migrants
B) The existence of an urban informal sector
C) The conversion of rural migrants to international migration
D) Government failure to register employed and unemployed rural migrants.
35) The relationship between youth dependency ratio and demographic dividend is best
described by:
A) Currently high youth dependency ratio may lead to higher demographic dividend later
B) Current youth dependency ratio has no relationship with demographic dividend later
C) Future youth dependency ratio is the outcome of past demographic dividend.
D) Youth dependency ratio multiplies contemporary demographic dividend
36) Which one of the following expresses portfolio investments linking economies of the world?
A) Trade in goods and services
B) International loans and purchases of stock
C) Foreign direct investment
D) Actions of international NGOs
37) Deficit in current account balances of developing countries is the outcome of _________
A) an excess of export payments over import
B) an excess of import payment over export
C) balance in import and export payments
D) surplus of aid and borrowing to debt service
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Model Exit Exam: Economics May 2024
38) Which one of the following DOES NOT express the traditional role of agriculture in
economic development,
A) Agriculture has been assumed to play a passive and supportive role.
B) The primary purpose of agriculture is to provide sufficient low-priced food and
manpower to the expanding industrial economy,
C) Agriculture is thought to be the dynamic “leading sector” in any overall strategy of
economic development.
D) Agricultural labor force has generally low productivity and that serves to initiate rural
urban migration
39) Any flow of capital to a developing country has to meet the following criteria to be called
“aid”
A) The interest rate and repayment period for borrowed capital should only be softer
than commercial terms
B) The flow of capital should only be non-commercial from the point of view of the
donor
C) The objective of the flow of capital should be non-commercial from the point of
view of the donor, and it should be characterized by concessional terms
D) The flow of capital should be free of interest and the repayment period should be 10
years or above
40) As compared to that of developed nations (typically western Europe), the demographic
transition of developing countries is characterized by:
A) Faster decline in mortality rates in stage II
B) Relatively lower magnitude of birth rates and death rates in stage I
C) Lower replacement level of fertility
D) Identical demographic characteristics across all developing countries in stage III
41) A semiskilled rural worker earns annual average real income of 20,000 birr. She can get
annual income of 40,000 birr in urban sector characterized by 60% unemployment rate. If her
planning horizon is one year, based on Todaro migration model we would recommend her to:
A) move to urban areas as actual urban income of 40,000 birr is greater than rural
income
B) move to urban areas as expected urban income of 24,000 birr is greater than rural
income
C) stay at rural areas because expected urban income of 16,000 birr is less than rural
income
D) stay at rural because expected urban income of 12,000 birr is less than rural income
42) Unlike in Asia and Latin America, the poor productivity of agricultural sector in Africa could
best be attributed to:
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Model Exit Exam: Economics May 2024
A) Introduction of monetized transactions and the rise in power of money lenders
B) The implementation of private property right associated with European colonial rule
C) The diminishing productivity of repeatedly cultivated land though there are still
considerable portion of idle land in the continent.
D) The concentration of large areas of land in the hands of landlords
43) According to Simon Kuznets,
A) Income inequality rises continuously as per capita income increases.
B) Income inequality falls continuously as per capita income increases.
C) Income inequality first rises then falls as per capita income increases.
D) Income inequality first falls then rises as per capita income increases.
44) Which of the following is true about the two-gap model?
A) The impact of capital inflows will be greater where the foreign exchange gap rather
than the saving gap is binding.
B) If the foreign exchange constraint is dominant, it implies that growth is constrained
by domestic investment.
C) Saving constraint is the most common characteristics of countries with excessive
domestic resources.
D) The Arab oil exporters of 1970s were good example of foreign exchange constraint
countries.
45) One of the following is an important achievement in the East Asian growth miracle.
A) Heavy reliance on extraction of natural resources
B) Increasing inequality
C) Growth with equity
D) None of the above
46) An important limitation of GDP per capita as a measure of development is related
to________.
A) The fact that less developed countries usually do not have a standard measure of GDP
per capita.
B) Its failure of capturing the production of capital goods in poor countries
C) It overstates the production of goods and services in poor countries.
D) The case that a considerable proportion of the services of women in Africa is
excluded
47) Which one of the following is not true about measurement of factor abundance?
A) When factor abundance is defined using price criteria a country in which one of the
factors of production is relatively cheaper is defined as having that factor of
production in abundance.
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Model Exit Exam: Economics May 2024
B) When factor abundance is defined using physical criteria, capital which is relatively
cheaper in a particular country, it will be regarded as a capital-rich country.
C) In physical criterion of factor abundance, a country could be defined as capital
(labour) abundant if the relative level of physical capital (labour) is larger than that of
labour (capital)
D) Using price criteria, if labour is relatively cheaper in a particular country, regardless
of the physical quantity of labour available, it will be regarded as a labour-rich
country.
48) One among the following is not correct about the Imitation Lag Hypothesis.
A) It paves the way for a better-known theory—the product cycle theory.
B) The imitation lag theory relaxes the assumption in the Heckscher-Ohlin analysis that
the same technology is available everywhere.
C) It assumes that there is no a delay in the transmission or diffusion of technology from
one country to another
D) The imitation lag considers both learning time lags and demand lags
49) Which one of the following statements is not true about the Krugman Model?
A) This theory of trade represents a family of newer trade models that has emerged since
Heckscher-Ohlin.
B) This model rests on two features that are sharply distinct from those of traditional
models: economies of scale and monopolistic competition.
C) In the Krugman model, labor and capital are assumed to be the only factors of
production.
D) None
50) Among the following one belong to the arguments for formulating trade protection policy in
a given country
A) National defense argument of tariff and fostering national pride in key industry
B) Tariff to improve a balance of trade and terms of trade argument for protection
C) Tariff to increase bargaining power
D) Differential protection as components of foreign policy /aid package
51) One is not among the Adam Smith’s assumptions on international trade theory.
A) There are constant returns to scale in the production of both goods in the
two countries
B) The production possibilities are such that both countries can produce both
the goods if they wish.
C) According to Adam Smith, trade between two nations is based on comparative
advantage
D) Adam Smith started with the simple truth that for two nations to trade with each other
voluntarily, both nations must gain.
52) One of the following statements about trade related development strategy is not true
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Model Exit Exam: Economics May 2024
A) Outward-looking development policies encourage not only free trade but also the
free movement of capital, workers, enterprises and students.
B) Inward-looking development policies stress the need for nations to evolve their own
styles of development and to control their own destiny.
C) Inward-looking development strategy encourages indigenous “learning by doing” in
manufacturing and developing technologies appropriate to a country’s resource
endowments.
D) Outward-looking development policies encourage import while inward-looking
development policy promote export.
53) Identify wrong statement about gains from trade and terms of trade
A) If two nations of approximately the same size and with similar taste patterns
participate in international trade, the gains from trade will be shared about equally
between them.
B) If one nation is significantly larger than the other, the larger nation attains fewer
gains from trade while the smaller nation attains most of the gains from trade.
C) An improvement in a nation’s terms of trade requires that the prices of its exports
decrease relative to the prices of its imports over the given time period.
D) Deterioration in a nation’s terms of trade is due to a rise in its import prices relative
to its export prices over a time period.
54) In the context of a foreign exchange market, which one of the following is TRUE about the
role of an arbitrager?
A) An arbitrager buys a foreign currency where it is cheaper and sells it where it is
expensive in order to make a profit
B) An arbitrager buys a foreign commodity where it is cheaper and sells it where it is
expensive in order to make a profit
C) An arbitrager accepts a foreign exchange risk in the hope of making a profit
D) An arbitrager avoids a foreign exchange risk through the diversification of assets
55) Suppose a basket of goods costs $400 in the United States and, let the same basket cost £250
in the United Kingdom. According to the purchasing power parity theory, what will be the
exchange rate between the dollar and the pound sterling?
A) $1.60 = £1.00
B) $1.00 = £1.60
C) $2.00 = £1.50
D) $1.50 = £2.00
56) Suppose USA imports a certain good (say, good X) from the UK. The initial exchange rate
between the USA dollar and UK pound sterling currencies was $2.50 = 1£ and the price of
the good was P = $25. Assume that the pound has appreciated and now the exchange rate is $
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Model Exit Exam: Economics May 2024
3.50 = 1 £ and the new price is P 1 = 30. Other things being constant, what will be the
exchange - rate pass - through?
A) 40.0 percent
B) 20.0 percent
C) 5.0 percent
D) 0.5 percent
57) Assuming a perfectly competitive market structure, which one of the following statements is
TRUE about the impact of foreign exchange rate on a country’s balance of trade, other
things being constant?
A. An increase in the value of a country’s currency leads to favorable balance of trade
B. A decrease in the value of a country’s currency leads to unfavorable balance of trade
C. An increase in the value of a country’s currency makes imports cheaper and exports
expensive , leading to unfavorable balance of trade
D. A decrease in the value of a country’s currency makes exports cheaper and imports
expensive, leading to favorable balance of trade
58) According to the Marshall – Lerner condition to balance of payments, when does
devaluation worsen the trade balance?
A) When the sum of the elasticity of foreign demand for exports and the elasticity of
domestic demand for imports is less than unity
B) When the sum of the elasticity of foreign demand for exports and the elasticity of
domestic demand for imports is greater that unity
C) When the economy operates inside the production possibility frontier
D) When the economy operates outside the production possibility frontier
59) According to the accounting principle of recording balance of payments, which one of the
following transactions is NOT recorded under the current account of the balance of
payment?
A) Receipts on export of goods and services
B) Expenditures on import of goods and services
C) Inflow of remittances from abroad
D) Inflow of foreign direct investment
60) In the context of the international debt crisis, how do you distinguish between default and
moratorium?
A) Default is failure to repay a debt, while moratorium is a temporary suspension of
debt repayment
B) Default is a temporary suspension of debt repayment, while moratorium is failure to
repay the debt
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Model Exit Exam: Economics May 2024
C) Default is the contract date of the debt, while moratorium is the maturity date of the
debt
D) Default is the maturity date of the debt, while moratorium is the contract date of the
debt
61) Which organ of the World Bank Group is primarily concerned with private – sector
development in less developed countries?
A) The Multilateral Investment Guarantee Agency
B) The International Finance Corporation
C) The International Bank for Reconstruction and Development
D) The International Development Association
62) Financial institutions are
A) dealers in securities, they buy secondary securities and sell primary securities.
B) dealers in securities, they buy primary securities and sell secondary securities.
C) dealers in financial assets, they by financial assets and sell physical assets.
D) dealers in physical assets, they by financial assets and sell physical assets.
63) A speculator who thinks the current rate of interest is high relative to its long run critical
value will prefer to put her speculative balance into____________.
A) cash
B) bond
C) less cash and more bond
D) less bond more cash
64) In actual fact/sense, the Irving Fisher’s version of the QTM is
A) The real demand for money
B) the actual quantity of money
C) the transaction velocity of circulation of money
D) the nominal demand for money.
65) How does increase in national output affect public’s preference towards holding
currency and deposits?
A) Less currency relative to deposits
B) More currency relative to deposits
C) Both currency and deposits will decease
D) Currency will decrease while deposits increases
66) If the U.S. dollar appreciates relative to the Ethiopian Birr, then
A) More birr will be required to purchase one dollar
B) Fewer birr will be required to purchase one dollar
C) The dollar has weakened relative to the birr
D) Ethiopia’s demand for U.S. goods will increase
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Model Exit Exam: Economics May 2024
67) If the National Bank wants to reduce the money supply, which policy intervention is
relevant?
A) Conduct an open market sale of bonds.
B) Conduct an open market purchase of bonds.
C) Reduce the reserve requirement.
D) Expand domestic credit.
68) Suppose: Money Supply = M = {(1 + c) /(r + c) }MB. c = C/ D = currency deposit ratio,
and r = R /D = reserve ration, MB= Monetary Base = C +R = Currency plus Reserves and 0
< c, r < 1.
Then if the term (1+c)/(r+c) = m is the money multiplier is strictly greater than unity. Which of the
following is TRUE?
A) One unit change in monetary base leads to less than one unit change in money supply
B) One unit change in monetary base leads to an equal change in money supply
C) One unit change in monetary base does not change in money supply.
D) One unit change in monetary base leads to more than one unit change in money supply
69) Which if the following is TRUE about money market and capital market?
A) Both are important components of international financial market
B) Both markets do not permit investors to purchase debt securities
C) Business and governments depend only on money market for raising money for
operation.
D) Business and governments depend only on capital market for raising money for
operation.
70) Which of the following is TRUE about money multipliers, m1, m2 and m3
which are respectively associated with monetary aggregates M1, M 2 and
M3
A) m1< m2 > m3
B) m1< m2 < m3
C) m1> m2 > m3
D) m1= m2 = m3
71) Which of the following BEST describes the conduct of monetary policy in devlopeming
countries?
A) Monetary authorities can control the monetary base and hence can control money supply
effectively
B) The extent to which monetary authorities control money supply depends up on their
knowledge of the sources of changes in monetary base
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Model Exit Exam: Economics May 2024
C) The extent to which monetary authorities control monetary base depends up on their
knowledge of the sources of changes money supply
D) The extent to which monetary authorities influence money supply depends up on their
knowledge of the sources of changes in monetary base.
72) Two events, A and B, are said to independent if:
A) P(A|B) = P(B)
B) P (A ∩ B) = 0
C) P (A ∩ B) = P(A).P(B)
D) P(B/A) = P(A)
73) Consider an experiment of tossing two coins. Let event A be an event of observing exactly
two heads and event let B be an event of observing at least one tail.
A) P(A) > P(B)
B) P(B) = P(A)
C) P(AUB) = P(B)
D) P(B|A) ≠ 1
74) Two independent random variables X and Y have variances 0.2 and 0.5, respectively. Let
Z=10X-4Y. The variance of Z is?
A) 12
B) 16
C) 25
D) 28
75) If ∑ P ( x )=k 2−8 the, the value of k is
A) 0
B) 1
C) 3
D) Insufficient data
76) The sum of `n´ independent exponential random variables with parameter λ results in:
A) Uniform random variable
B) Normal random variable
C) Gamma random variable
D) Binomial random variable
77) Which of the following is not a method of Estimation?
A) Ordinary Least Squares
B) Maximum Likelihood
C) Method of Moments
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Model Exit Exam: Economics May 2024
D) Sample Mean
78) We need normality of error terms in linear regression model for
A) Estimating the parameters of the model
B) Checking the unbiasedness property
C) Conducting hypothesis testing and making inferences
D) Calculating coefficient of determination
Then answer questions 79 through 81 based on the below information.
The following results have been obtained from a sample of 20 households on the household
saving (Y), household income ( X 1 ) and bank saving interest rate ( X 2 ) where except information
in the first column, other information are in deviation forms.
∑ Y =320 2
∑ y =70 ∑ x 1 y =60
∑ X 1=300 2
∑ x 1=100 ∑ x 2 y =50
∑ X 2=360 2
∑ x 2=80 ∑ x 1 x 2=60
79) The slope coefficients (the value of β 1 and β 2) for the above regression function, respectively
are,
A) 0.409 and 4.136
B) 0.409 and 0.318
C) 0.318 and 4.136
D) 0.318 and 4.136
80) The Coefficient of the determination for the above model is
A) 47.48
B) 87.78
C) 57.79
D) 65.79
81) The standard error for the slope coefficient ^β 1 is
A) 1.409
B) 1.136
C) 1.318
D) 1.209
82) Suppose you want to estimate the effect of household income and house size on electricity
consumption. Based on the information from economic theory, you have identified that
increase in house size is strongly correlated with the household income. Which classical
regression model assumption will more likely be violated if you estimated the above model
using Ordinary Least Square (OLS)
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Model Exit Exam: Economics May 2024
A) No model misspecification
B) No autocorrelation problem
C) No heteroscedasticity problem
D) No multicollinearity problem
83) Which of the following leads to the problem of model misspecification?
A) Inclusion of one or more relevant variables from the model
B) Omission or one or more irrelevant variables are included in the model.
C) Incorrect functional form of the model
D) Estimating the non-linear model when the true model is non-linear
84) If a Durbin Watson statistic takes a value close to zero, what will be the value of the first
order autocorrelation coefficient?
A) Close to minus one
B) Close to zero
C) Less than zero
D) Close to plus one
85) The autoregressive AR(1) model with the disturbances having zero mean and unit variance is
given by yt = 0.2 + 0.4 yt-1 + ut. What is the mean of this AR(1)?
A) 0.2
B) 0.4
C) 0.5
D) 0
86) One of the following statements is NOT true about the Probit model?
A) Significance of single coefficient can be test using t-test
B) It is possible to estimate the Probit model using maximum likelihood technique
C) It is possible to estimate the Probit model using OLS
D) Coefficient of determination has no usual interpretation.
87) Which of the following shows the correct sequence in a project cycle (not necessarily
complete)
A) Preparationidentificationimplementationappraisal
B) Identificationappraisalpreparationimplementation
C) Identificationpreparationappraisalimplementation
D) Appraisalpreparationimplementationidentification
88) Which of the following is not true about the internal rate of return (IRR)?
A) It can be calculated without reference to a predetermined discount rate.
B) It can be used in appraising both independent project and mutually exclusive projects.
C) It is possible to get two different IRR values for a given project.
D) The calculation of IRR requires the project to have at least one negative cash flow period.
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Model Exit Exam: Economics May 2024
89) Which one of the following statements is/ are incorrect concerning the project life cycle?
A) At the appraisal stage the technical and financial feasibility of the project will be checked
B) Project evaluation is limited only to completed projects.
C) The project concept definition is a prerequisite to the decision to proceed to identification
D) A project has a chance of being rejected at the implementation phase
90) In financial analysis, depreciation cost of fixed assets is
A) fixed costs
B) Working capital costs
C) operating costs
D) None
91) Which of the following statement is correct concerning the Net Benefit Investment Ratio
(NBIR) project appraisal criteria?
A) It is a ratio of the value of the projects discounted benefits to discounted investment costs
B) The criterion is important for ranking independent projects
C) Accept the project if the NBIR is greater than zero
D) It is suitable for comparison of mutually exclusive projects
92) The critical values for the function f ( x )=2 x 3−3 x 2−12 x+12 are
A) -2 and 1
B) 2 and -2
C) -1 and -2
D) -1 and 2
93) Which one of the following is true about differentiable functions
A)All continuous functions are differentiable
B) Differentiable functions may have a vertical tangent line
C)All differentiable functions must be continuous functions
D)None
94) It is estimated that x months from now, the population of a certain community will be
2
P ( X )=x +20 x +8000, by how much will the population actually change during the 16th
month?
A) 51
B) 50
C) 52
D) 32
95) Suppose the equation of an isoquant is Q ( K , L ) =K 0.5 L0.5=C . The marginal rate of technical
substitution of labour for capital ( MRTS L ,K )when L=3 and K=4 is
A) 0.75
B) 1.3
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Model Exit Exam: Economics May 2024
C) 12
D) 1
96) A health store carries two kinds of vitamin water, brand A and Brand B. Sales figures
indicate that if brand A is sold for x dollars per bottle and brand B for y dollars per bottle,
and if the demand for brand A is given as Q ( x , y )=300−20 x 2+ 30 y bottles per month.
Furthermore, it is estimated that t months from now the price of brand A will be x=2+0.05 t
dollars per bottle and the price of brand B will be y=2+ 0.1 √ t dollars per bottle. At what rate
will the demand for brand A be changing with respect to time 4 months from now?
A) 2.2
B) -3.65
C) 0.2
D) 2
dy
97) What is the value of for the implicit function f ( y , x )=x 2+ y 2−4
dx
dy −x
A) =
dx y
dy x
B) =
dx y
dy y
C) =
dx x
dy − y
D) =
dx x
98) What is the general solution of the difference equation?
A) Pt =15+ A(−0.5)t
B) Pt =12+ A (−0.5)t
C) Pt =15+ A(0.5)t
D) Pt =12+ A (0.5)t
A dynamic optimization problem is given by
1
Max ∫ ( x− y ) dt
2
0
Subject to ẋ= y
x ( 0 )=2
Answer questions 99 and 100 based on the given dynamic optimization problem
99) The solution path for the control variable y is
1−t
A) y ( t ) =
2
20
Model Exit Exam: Economics May 2024
2
B) y ( t ) =
1−t
C) y ( t ) =1−t
2
t t
D) y ( t ) = − +2
2 4
100) The solution path to the costate variable λ is
1−t
A) λ ( t )=
2
2
B) λ ( t )=
1−t
C) λ ( t )=1−t
2
t t
D) λ ( t )= − + ¿2
2 4
Answer Sheet
Name: _____________________________________ ID. No. ___________ Section:_________
No Answer No. Answer No. Answer No.
.
1) 26) 51) 76)
2) 27) 52) 77)
3) 28) 53) 78)
4) 29) 54) 79)
5) 30) 55) 80)
6) 31) 56) 81)
7) 32) 57) 82)
8) 33) 58) 83)
9) 34) 59) 84)
21
Model Exit Exam: Economics May 2024
10) 35) 60) 85)
11) 36) 61) 86)
12) 37) 62) 87)
13) 38) 63) 88)
14) 39) 64) 89)
15) 40) 65) 90)
16) 41) 66) 91)
17) 42) 67) 92)
18) 43) 68) 93)
19) 44) 69) 94)
20) 45) 70) 95)
21) 46) 71) 96)
22) 47) 72) 97)
23) 48) 73) 98)
24) 49) 74) 99)
25) 50) 75) 100)
22