Economics concepts worksheet with answers

A budget deficit occurs when:

1. AGovernment spending exceeds government revenue in a year
2. BTotal government debt falls
3. CA firm's costs exceed its revenue
4. DThe value of imports exceeds the value of exports in a year

Which body sets monetary policy for the euro area?

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

A common rule of thumb defines a recession as:

1. AAny month with rising unemployment
2. BA year with inflation above 5%
3. CTwo consecutive quarters of falling real GDP
4. DA fall in the stock market of 10%

A currency depreciation tends to:

1. AHave no effect on trade
2. BReduce the price of all domestic goods and make imports cheaper
3. CMake exports cheaper abroad and imports more expensive
4. DMake imports cheaper

In the long run in monopolistic competition, firms typically:

1. AProduce at the minimum of average total cost
2. BEarn zero economic profit and have excess capacity
3. CEarn large economic profits protected by entry barriers
4. DCharge a price equal to marginal cost

A sharp rise in world oil prices leading to higher inflation is an example of:

1. ADemand-pull inflation
2. BDisinflation
3. CDeflation
4. DCost-push inflation

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

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

A monopolist maximises profit where:

1. ATotal revenue is at its maximum
2. BAverage cost is at its minimum
3. CMarginal revenue equals marginal cost
4. DPrice equals marginal cost