Economics concepts worksheet with answers

Macroeconomics studies:

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

According to the law of demand, when the price of a normal good rises (other things equal):

1. ADemand shifts to the right
2. BThe quantity demanded falls
3. CSupply falls
4. DThe quantity demanded rises

A progressive tax is one where:

1. AEveryone pays the same amount of tax
2. BEveryone pays the same percentage of income
3. CThe proportion of income paid in tax rises as income rises
4. DThe proportion of income paid falls as income rises

A currency depreciation tends to:

1. AReduce the price of all domestic goods and make imports cheaper
2. BMake imports cheaper
3. CMake exports cheaper abroad and imports more expensive
4. DHave no effect on trade

The principle of diminishing marginal utility states that:

1. AConsumers always prefer more expensive goods
2. BSatisfaction rises as income falls
3. CTotal satisfaction falls with each additional unit of the good that is consumed
4. DExtra satisfaction from each additional unit consumed tends to fall

The law of diminishing marginal returns states that:

1. AAdding more of a variable input to a fixed input eventually lowers the extra output per unit added
2. BLong-run average costs always fall as output rises
3. CTotal output always falls as more workers are hired
4. DConsumers get less satisfaction as prices rise

For a normal good, when its price falls, the substitution effect and income effect:

1. AWork in opposite directions
2. BCancel out exactly
3. CBoth decrease the quantity demanded
4. DBoth increase the quantity demanded

The Fisher effect predicts that, in the long run, a permanent 2 percentage point rise in expected inflation will:

1. ARaise nominal interest rates by about 2 points, leaving real rates unchanged
2. BRaise real interest rates by about 2 points
3. CLower nominal interest rates by about 2 points
4. DHave no effect on nominal interest rates, so real interest rates fall by about 2 points