Economics concepts worksheet with answers

GDP measures:

1. AThe value of all exports only
2. BThe government's budget
3. CThe total market value of final goods and services produced in a country in a period
4. DThe total wealth and savings held by a country's citizens and firms at the end of a year

A good for which demand rises when income rises is called:

1. AAn inferior good
2. BA normal good
3. CA public good
4. DA Giffen good

Market failure occurs when:

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

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

1. A2.5%
2. B3%
3. C10%
4. D7%

Both supply and demand for a good increase. What can we say for certain about the new equilibrium?

1. ABoth price and quantity rise
2. BBoth price and quantity fall
3. CQuantity rises, but the change in price is uncertain
4. DPrice rises, but the change in quantity is uncertain

The marginal cost curve cuts the average total cost curve:

1. AAt the maximum point of average total cost
2. BNever, as the two curves are parallel
3. CWhere average total cost equals zero
4. DAt the minimum point of average total cost

The time-inconsistency problem in monetary policy (Kydland and Prescott) is a key argument for:

1. AGovernments setting interest rates directly, especially before elections
2. BIndependent central banks with a credible commitment to low inflation
3. CAbolishing central banks entirely
4. DFixing the money supply at zero growth

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

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