Economics concepts worksheet with answers

A tariff is:

1. AA tax on imported goods
2. BA limit on the quantity of imports
3. CA subsidy for exporters
4. DA ban on all foreign trade

Economies of scale occur when:

1. ALong-run average cost falls as output increases
2. BA firm produces less to cut costs
3. CTotal costs fall as output increases
4. DPrices rise as the firm grows

Which statement is a normative statement?

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

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

1. A1.5%
2. B24%
3. C10%
4. D2%

A public good is:

1. AProvided only by private firms
2. BAny good bought by the government
3. CRival and excludable
4. DNon-rival and non-excludable

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

1. AReduces bank reserves and so shrinks the money supply
2. BRaises tax revenue for the government
3. CHas no effect on the money supply
4. DIncreases bank reserves and the money supply

A deadweight loss represents:

1. AThe tax revenue collected by the government
2. BThe loss of total surplus when output differs from the efficient level
3. CLosses made by firms that are forced to leave the market in the long run
4. DThe profit of a monopolist

The time-inconsistency problem in monetary policy (Kydland and Prescott) is a key argument for:

1. AAbolishing central banks entirely
2. BGovernments setting interest rates directly, especially before elections
3. CFixing the money supply at zero growth
4. DIndependent central banks with a credible commitment to low inflation