Economics concepts worksheet with answers

A cartel is:

1. AA trade union that negotiates wages
2. BA single firm that controls the whole market for a product or service
3. CA government agency that regulates prices
4. DA group of firms that agree to coordinate prices or output

Which body sets monetary policy for the euro area?

1. AThe European Parliament
2. BThe national finance ministries
3. CThe European Commission
4. DThe European Central Bank

The basic economic problem of scarcity means that:

1. AWants are unlimited but resources to satisfy them are limited
2. BPrices are always rising over time
3. CSome goods are always unavailable in shops because firms produce too little
4. DOnly poor countries need to make choices

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

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

Crowding out refers to:

1. AToo many firms entering a market
2. BOvercrowded public services
3. CImports replacing domestic production
4. DHigher government borrowing raising interest rates and reducing private investment

In country A, 1 car costs 2 tonnes of wheat to produce; in country B, 1 car costs 4 tonnes of wheat. Which statement is correct?

1. AA has a comparative advantage in both goods
2. BNeither country gains from trade
3. CA has a comparative advantage in cars and B in wheat
4. DB has a comparative advantage in cars and A in wheat

The Laffer curve illustrates that:

1. ALower tax rates always reduce tax revenue, whatever the starting rate
2. BHigher tax rates always increase tax revenue
3. CBeyond some point, raising tax rates can reduce total tax revenue
4. DTax revenue is unrelated to tax rates

According to the quantity theory of money (MV = PY), if velocity and real output are constant, a 5% rise in the money supply leads to:

1. ANo change in prices
2. BAbout a 5% rise in real output
3. CAbout a 5% rise in the price level
4. DA 5% fall in velocity