Economics concepts worksheet with answers

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

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

Real GDP differs from nominal GDP because real GDP:

1. AIncludes only goods, not services
2. BIs adjusted for changes in the price level
3. CIs measured in a foreign currency
4. DExcludes government spending

Fiscal policy uses:

1. AExchange rate controls only
2. BGovernment spending and taxation
3. CTrade agreements only
4. DInterest rates set by the central bank

In the short run, a firm in perfect competition should shut down if the market price is below:

1. AAverage variable cost
2. BAverage fixed cost
3. CMarginal revenue
4. DAverage total cost

A sharp rise in world oil prices leading to higher inflation is an example of:

1. ADisinflation
2. BDeflation
3. CDemand-pull inflation
4. DCost-push inflation

The price of a good rises by 10% and quantity demanded falls by 20%. The price elasticity of demand is:

1. A-0.5, so demand is inelastic
2. B-2, so demand is elastic
3. C-2, so demand is inelastic
4. D-0.5, so demand is elastic

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

1. ACancel out exactly
2. BBoth decrease the quantity demanded
3. CWork in opposite directions
4. DBoth increase the quantity demanded

The Phillips curve originally suggested:

1. AThat unemployment has no link to inflation
2. BThat higher taxes always reduce inflation
3. CA trade-off between inflation and unemployment in the short run
4. DThat inflation and unemployment always rise and fall together in the short run