Question.1,

Elucidate how an economy's income must always equal its expenditure?

Question.2,

Discuss the problems with the Consumer Price Index?

Question.3,

If you are given a choice to live in a country with high level of GDP and low growth rate or to live in a low level of GDP and a high growth rate, which option would you choose and why?

Question .4,

Assume a hypothetical society that decides to reduce consumption (production of consumption goods) and increase investment (production of capital goods).

i)How would this change affect economic growth?

ii)What groups in society would benefit from this change? What groups might be hurt?

Question.5,

A)What is fiat money? What is commodity money? Which kind do we use?

B)Explain whether each of the following events increases or decreases the money supply.

1)The State Bank of Pakistan sells bonds in open-market operations.

2)The State Bank of Pakistan increases the reserve requirement.

3)The State Bank of Pakistan reduces the interest rate it pays on reserves.

4)MCB Bank repays a loan it had previously taken from the State Bank of Pakistan.

5)After a rash of pickpocketing, people decide to hold less currency.

6)Fearful of bank runs, bankers decide to hold more excess reserves.