Economics concepts worksheet with answers

Price elasticity of demand measures:

1. AHow much firms can raise their prices
2. BHow responsive quantity supplied is to changes in consumer income
3. CHow responsive quantity demanded is to a change in price
4. DHow quickly prices change over time

A budget deficit occurs when:

1. AThe value of imports exceeds the value of exports in a year
2. BA firm's costs exceed its revenue
3. CTotal government debt falls
4. DGovernment spending exceeds government revenue in a year

A market with only one seller is called:

1. APerfect competition
2. BA monopoly
3. CAn oligopoly
4. DA monopsony

Nominal GDP grew by 5% and the GDP deflator rose by 2%. Real GDP grew by approximately:

1. A7%
2. B10%
3. C3%
4. D2.5%

Rising consumer confidence would most likely:

1. AShift aggregate demand to the right
2. BShift aggregate demand to the left
3. CShift aggregate supply to the left
4. DHave no effect on the economy

A negative externality occurs when:

1. AThe government taxes a product
2. BA third party bears a cost not paid by the producer or consumer
3. CConsumers pay more for a product than it costs the firm to produce
4. DA firm makes a loss

The "convergence hypothesis" from the Solow model predicts that:

1. AExchange rates converge to a fixed value
2. BAll countries will eventually have the same population
3. CRich countries always grow faster than poor ones, because they have more capital
4. DPoorer countries with similar fundamentals tend to grow faster than richer ones

A liquidity trap is a situation where:

1. AInflation is very high and rising
2. BInterest rates are near zero and further monetary expansion has little effect on demand
3. CThe central bank raises interest rates sharply to fight high and rapidly rising inflation
4. DBanks have no money left to lend