Economics concepts worksheet with answers

Deflation is:

1. AA slowdown in the rate of inflation, with prices still rising
2. BA reduction in government spending
3. CA sustained fall in the general price level
4. DA fall in the value of the currency

If supply increases while demand stays the same, the equilibrium price will usually:

1. AFall
2. BStay exactly the same
3. CBecome zero
4. DRise

Adam Smith's example of the pin factory illustrated the benefits of:

1. APrice controls
2. BFree trade between countries
3. CThe division of labour
4. DGovernment regulation

Both supply and demand for a good increase. What can we say for certain about the new equilibrium?

1. APrice rises, but the change in quantity is uncertain
2. BBoth price and quantity rise
3. CBoth price and quantity fall
4. DQuantity rises, but the change in price is uncertain

A currency depreciation tends to:

1. AHave no effect on trade
2. BMake imports cheaper
3. CReduce the price of all domestic goods and make imports cheaper
4. DMake exports cheaper abroad and imports more expensive

The principle of diminishing marginal utility states that:

1. AConsumers always prefer more expensive goods
2. BTotal satisfaction falls with each additional unit of the good that is consumed
3. CExtra satisfaction from each additional unit consumed tends to fall
4. DSatisfaction rises as income falls

The "paradox of thrift" suggests that if all households try to save more during a recession:

1. ATotal income may fall, so total saving does not rise
2. BInterest rates will rise sharply
3. CInflation will increase
4. DInvestment and growth will rise immediately

In the Prisoner's Dilemma, the Nash equilibrium is:

1. ABoth players defect, even though both cooperating would be better
2. BOne player cooperates and the other defects, so only one of them gains
3. CThere is no equilibrium
4. DBoth players cooperate