Economics concepts worksheet with answers

Structural unemployment is caused by:

1. ASeasonal changes in demand for labour
2. BA mismatch between workers' skills or location and the jobs available
3. CA temporary fall in aggregate demand
4. DThe normal time that workers take to search for and move between jobs

Inflation is:

1. AA rise in the price of one product
2. BA fall in unemployment
3. CAn increase in the money supply, whatever happens to prices
4. DA sustained rise in the general price level

Which body sets monetary policy for the euro area?

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

A public good is:

1. AAny good bought by the government
2. BNon-rival and non-excludable
3. CProvided only by private firms
4. DRival and excludable

The law of diminishing marginal returns states that:

1. AAdding more of a variable input to a fixed input eventually lowers the extra output per unit added
2. BLong-run average costs always fall as output rises
3. CConsumers get less satisfaction as prices rise
4. DTotal output always falls as more workers are hired

Crowding out refers to:

1. AOvercrowded public services
2. BHigher government borrowing raising interest rates and reducing private investment
3. CImports replacing domestic production
4. DToo many firms entering a market

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

1. AWork in opposite directions
2. BBoth increase the quantity demanded
3. CBoth decrease the quantity demanded
4. DCancel out exactly

Why does the deadweight loss of a tax grow when the good's demand and supply are more elastic?

1. AElastic markets have no consumer surplus
2. BThe government collects more tax revenue
3. CQuantity traded falls more, so more mutually beneficial trades are lost
4. DPrices do not change, so consumers bear the whole burden of the tax instead