Economics concepts worksheet with answers

Two goods are complements if:

1. AThey have the same price
2. BDemand for both rises when the price of either one of them rises
3. CA rise in the price of one reduces demand for the other
4. DOne can easily replace the other

Two goods are substitutes if:

1. AThey are produced by the same firm
2. BA rise in the price of one increases demand for the other
3. CThey are always consumed together
4. DA rise in income reduces demand for both goods at the same time

A progressive tax is one where:

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

The price of petrol rises sharply. What happens to the demand curve for large cars?

1. AIt becomes vertical
2. BIt shifts to the right
3. CThere is a movement along it
4. DIt shifts to the left

Rising consumer confidence would most likely:

1. AShift aggregate supply to the left
2. BHave no effect on the economy
3. CShift aggregate demand to the left
4. DShift aggregate demand to the right

If demand for a product is price inelastic, a price increase will:

1. ADecrease total revenue
2. BReduce quantity demanded to zero
3. CIncrease total revenue
4. DLeave total revenue unchanged

Purchasing power parity (PPP) suggests that, in the long run, exchange rates adjust so that:

1. ATrade balances are always zero
2. BInterest rates are equal in all countries
3. CThe same basket of goods costs the same in different countries
4. DEvery currency ends up having the same nominal value as the US dollar

The J-curve effect describes why, after a depreciation, the trade balance may:

1. ARemain unchanged for many years
2. BWorsen at first and then improve
3. CImprove at first and then worsen
4. DImprove immediately and permanently