Economics concepts worksheet with answers

Inflation is:

1. AA sustained rise in the general price level
2. BAn increase in the money supply, whatever happens to prices
3. CA fall in unemployment
4. DA rise in the price of one product

In economics, the short run is a period in which:

1. AAt least one factor of production is fixed
2. BAll factors of production can be varied
3. CPrices cannot change
4. DThe firm must make a loss

Monopolistic competition is a market with:

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

The marginal propensity to consume is:

1. AThe interest rate on consumer loans
2. BThe total consumption in an economy
3. CThe average share of total income that households save over a year
4. DThe share of an extra euro of income that is spent on consumption

If demand for a product is price inelastic, a price increase will:

1. AReduce quantity demanded to zero
2. BDecrease total revenue
3. CLeave total revenue unchanged
4. DIncrease total revenue

In an oligopoly, firms are typically:

1. AA single seller in the market
2. BMany and too small to affect the price
3. CCompletely unregulated by competition law
4. DFew and interdependent in their decisions

Ricardian equivalence suggests that a debt-financed tax cut will:

1. AAlways cause inflation
2. BHave little effect on spending, because households save to pay expected future taxes
3. CReduce interest rates sharply
4. DStrongly increase consumption, because households spend most of the tax cut through the multiplier

Why does the deadweight loss of a tax grow when the good's demand and supply are more elastic?

1. AQuantity traded falls more, so more mutually beneficial trades are lost
2. BThe government collects more tax revenue
3. CElastic markets have no consumer surplus
4. DPrices do not change, so consumers bear the whole burden of the tax instead