Economics concepts worksheet with answers

Which body sets monetary policy for the euro area?

1. AThe European Central Bank
2. BThe European Commission
3. CThe European Parliament
4. DThe national finance ministries

The Consumer Price Index (CPI) measures:

1. AThe interest rate charged by banks
2. BThe prices that firms pay for raw materials and other inputs used in their production
3. CThe total value of goods produced in a country
4. DThe changing cost of a fixed basket of goods and services bought by households

The basic economic problem of scarcity means that:

1. ASome goods are always unavailable in shops because firms produce too little
2. BOnly poor countries need to make choices
3. CPrices are always rising over time
4. DWants are unlimited but resources to satisfy them are limited

A savings account pays a nominal interest rate of 6% and inflation is 4%. The approximate real interest rate is:

1. A2%
2. B24%
3. C1.5%
4. D10%

Rising consumer confidence would most likely:

1. AShift aggregate supply to the left
2. BShift aggregate demand to the right
3. CShift aggregate demand to the left
4. DHave no effect on the economy

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

1. ABoth price and quantity fall
2. BQuantity rises, but the change in price is uncertain
3. CPrice rises, but the change in quantity is uncertain
4. DBoth price and quantity rise

The Marshall–Lerner condition states that a currency depreciation improves the trade balance if:

1. AInterest rates rise at the same time
2. BThe sum of the price elasticities of demand for exports and imports exceeds 1
3. CExports and imports have zero price elasticity
4. DThe country has a budget surplus

The principal–agent problem arises when:

1. ATwo firms agree to fix prices
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. DThe government owns a firm