Economics concepts worksheet with answers

What is opportunity cost?

1. AThe total money spent on a purchase, including any taxes and fees
2. BThe value of the best alternative given up when making a choice
3. CThe cost of starting a new business
4. DThe price of a product during a sale

Real GDP differs from nominal GDP because real GDP:

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

A good for which demand rises when income rises is called:

1. AA normal good
2. BA Giffen good
3. CAn inferior good
4. DA public good

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

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

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A5
2. B0.8
3. C1.25
4. D8

If the ECB raises its main interest rate, the most likely short-term effect is:

1. AA fall in the value of the euro
2. BHigher borrowing and spending, which adds to inflationary pressure
3. CAn immediate rise in GDP
4. DLower borrowing and spending, reducing inflationary pressure

Under a fixed exchange rate with free capital movement, a country:

1. ACan set any interest rate it likes
2. BMust have a budget surplus
3. CLoses control of independent monetary policy
4. DCannot trade with other countries

The Lerner index (P − MC)/P for a profit-maximising monopolist equals 1/|PED|. If |PED| = 4, the price is:

1. AEqual to marginal cost
2. B25% above marginal cost, as a share of price
3. C4 times marginal cost
4. D75% above marginal cost, as a share of price