Economics concepts worksheet with answers

Real GDP differs from nominal GDP because real GDP:

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

Economies of scale occur when:

1. ATotal costs fall as output increases
2. BA firm produces less to cut costs
3. CLong-run average cost falls as output increases
4. DPrices rise as the firm grows

Which of these is a barrier to entry into a market?

1. ALow start-up costs
2. BPatents held by existing firms
3. CPerfect information for all buyers
4. DMany small firms selling identical products

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

1. ADeflation
2. BCost-push inflation
3. CDisinflation
4. DDemand-pull inflation

In perfect competition in the long run, firms earn:

1. AZero economic profit
2. BLarge economic profits
3. CMonopoly profits
4. DLosses forever

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

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

A liquidity trap is a situation where:

1. AThe central bank raises interest rates sharply to fight high and rapidly rising inflation
2. BInflation is very high and rising
3. CBanks have no money left to lend
4. DInterest rates are near zero and further monetary expansion has little effect on demand

Using the "rule of 70", an economy growing at 7% per year will double its real GDP in about:

1. A7 years
2. B10 years
3. C70 years
4. D49 years