Economics concepts worksheet with answers

A budget deficit occurs when:

1. AA firm's costs exceed its revenue
2. BThe value of imports exceeds the value of exports in a year
3. CGovernment spending exceeds government revenue in a year
4. DTotal government debt falls

A good for which demand rises when income rises is called:

1. AA public good
2. BA Giffen good
3. CA normal good
4. DAn inferior good

Deflation is:

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

Education generates benefits for society beyond the individual student. Without intervention, the market will likely:

1. AOver-provide education compared with the social optimum
2. BProvide exactly the efficient amount of education, as prices reflect all benefits
3. CStop providing education altogether
4. DUnder-provide education compared with the social optimum

Using the expenditure approach, GDP equals:

1. AC − I + G − (X + M)
2. BC + I + G + (X − M)
3. CWages + profits − taxes
4. DC + I + G + X + M

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A8
2. B0.8
3. C5
4. D1.25

A Giffen good is one where:

1. AThe price never changes
2. BQuantity demanded rises when its price rises, because a strong income effect outweighs the substitution effect
3. CDemand rises because the good is a status symbol
4. DDemand rises with income, like most goods

The principal–agent problem arises when:

1. AThe government owns a firm
2. BAn agent acting for a principal has different goals and the principal cannot fully monitor them
3. CA buyer and seller have identical information
4. DTwo firms agree to fix prices