Economics concepts worksheet with answers

Macroeconomics studies:

1. AThe accounts of a single company
2. BThe economy as a whole, such as inflation, unemployment and growth
3. CThe decisions of individual households and firms in particular markets
4. DOnly the stock market

Monopolistic competition is a market with:

1. AMany firms selling identical products with no branding or advertising
2. BMany firms selling differentiated products, with free entry
3. COne firm and high barriers to entry
4. DA few firms selling identical products

Real GDP differs from nominal GDP because real GDP:

1. AIncludes only goods, not services
2. BExcludes government spending
3. CIs measured in a foreign currency
4. DIs adjusted for changes in the price level

In perfect competition in the long run, firms earn:

1. AZero economic profit
2. BLarge economic profits
3. CMonopoly profits
4. DLosses forever

A country imposes a tariff on imported steel. Which effect is most likely?

1. ADomestic steel prices fall and imports rise
2. BDomestic consumers gain surplus
3. CThe world price of steel rises sharply for all countries that trade it
4. DDomestic steel prices rise and domestic production increases

When a central bank buys government bonds from banks in open market operations, it usually:

1. AIncreases bank reserves and the money supply
2. BRaises tax revenue for the government
3. CReduces bank reserves and so shrinks the money supply
4. DHas no effect on the money supply

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

1. AWorsen at first and then improve
2. BImprove at first and then worsen
3. CRemain unchanged for many years
4. DImprove immediately and permanently

Why is the real-world government spending multiplier usually smaller than the simple 1/(1 − MPC)?

1. AThe MPC is always above 1
2. BGovernments cannot borrow money
3. CConsumers never spend extra income
4. DTaxes, imports and crowding out leak part of each round of spending