Economics concepts worksheet with answers

Adam Smith's example of the pin factory illustrated the benefits of:

1. AFree trade between countries
2. BGovernment regulation
3. CPrice controls
4. DThe division of labour

Market failure occurs when:

1. AA firm goes bankrupt
2. BThe stock market falls sharply
3. CThe free market allocates resources inefficiently
4. DPrices rise in a market

Macroeconomics studies:

1. AThe economy as a whole, such as inflation, unemployment and growth
2. BThe accounts of a single company
3. CThe decisions of individual households and firms in particular markets
4. DOnly the stock market

If the ECB raises its main interest rate, the most likely short-term effect is:

1. ALower borrowing and spending, reducing inflationary pressure
2. BA fall in the value of the euro
3. CAn immediate rise in GDP
4. DHigher borrowing and spending, which adds to inflationary pressure

Nominal GDP grew by 5% and the GDP deflator rose by 2%. Real GDP grew by approximately:

1. A10%
2. B3%
3. C7%
4. D2.5%

A country has 950 employed people and 50 unemployed people seeking work. Its unemployment rate is:

1. A50%
2. B5%
3. C95%
4. D5.3%

In the Prisoner's Dilemma, the Nash equilibrium is:

1. AThere is no equilibrium
2. BBoth players defect, even though both cooperating would be better
3. COne player cooperates and the other defects, so only one of them gains
4. DBoth players cooperate

Why does the deadweight loss of a tax grow when the good's demand and supply are more elastic?

1. AElastic markets have no consumer surplus
2. BThe government collects more tax revenue
3. CPrices do not change, so consumers bear the whole burden of the tax instead
4. DQuantity traded falls more, so more mutually beneficial trades are lost