Economics concepts worksheet with answers

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

1. ASupply falls
2. BThe quantity demanded falls
3. CThe quantity demanded rises
4. DDemand shifts to the right

Macroeconomics studies:

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

In economics, the short run is a period in which:

1. APrices cannot change
2. BThe firm must make a loss
3. CAll factors of production can be varied
4. DAt least one factor of production is fixed

A public good is:

1. AProvided only by private firms
2. BAny good bought by the government
3. CRival and excludable
4. DNon-rival and non-excludable

The principle of diminishing marginal utility states that:

1. AExtra satisfaction from each additional unit consumed tends to fall
2. BConsumers always prefer more expensive goods
3. CSatisfaction rises as income falls
4. DTotal satisfaction falls with each additional unit of the good that is consumed

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

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

A deadweight loss represents:

1. AThe loss of total surplus when output differs from the efficient level
2. BThe tax revenue collected by the government
3. CThe profit of a monopolist
4. DLosses made by firms that are forced to leave the market in the long run

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

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