Economics concepts worksheet with answers

Which statement is a normative statement?

1. AThe government should raise the minimum wage
2. BHigher prices reduce quantity demanded
3. CUnemployment fell to 4% in June
4. DThe minimum wage rose by 3% last year

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

1. AAn inferior good
2. BA Giffen good
3. CA normal good
4. DA public good

According to the law of demand, when the price of a normal good rises (other things equal):

1. ASupply falls
2. BThe quantity demanded rises
3. CThe quantity demanded falls
4. DDemand shifts to the right

In country A, 1 car costs 2 tonnes of wheat to produce; in country B, 1 car costs 4 tonnes of wheat. Which statement is correct?

1. AA has a comparative advantage in cars and B in wheat
2. BB has a comparative advantage in cars and A in wheat
3. CNeither country gains from trade
4. DA has a comparative advantage in both goods

A price ceiling set below the equilibrium price typically causes:

1. AAn increase in supply
2. BA shortage
3. CNo change in the market
4. DA surplus

Comparative advantage means a country should specialise in goods it can produce:

1. AMore cheaply in absolute terms than every other country
2. BAt a lower opportunity cost than other countries
3. COnly for its own consumption
4. DWith the most workers

The J-curve effect describes why, after a depreciation, the trade balance may:

1. ARemain unchanged for many years
2. BImprove at first and then worsen
3. CImprove immediately and permanently
4. DWorsen at first and then improve

The "Taylor principle" says that, to stabilise inflation, a central bank should respond to a 1 percentage point rise in inflation by:

1. AKeeping the nominal rate unchanged
2. BRaising the nominal interest rate, but by less than 1 percentage point
3. CRaising the nominal interest rate by more than 1 percentage point
4. DCutting the nominal rate