Economics concepts worksheet with answers

Fiscal policy uses:

1. AGovernment spending and taxation
2. BExchange rate controls only
3. CTrade agreements only
4. DInterest rates set by the central bank

Monopolistic competition is a market with:

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

Two goods are complements if:

1. ADemand for both rises when the price of either one of them rises
2. BOne can easily replace the other
3. CThey have the same price
4. DA rise in the price of one reduces demand for the other

In an oligopoly, firms are typically:

1. AFew and interdependent in their decisions
2. BA single seller in the market
3. CMany and too small to affect the price
4. DCompletely unregulated by competition law

Overfishing in international waters is an example of:

1. AA Giffen good
2. BPrice discrimination
3. CThe tragedy of the commons
4. DA natural monopoly

Comparative advantage means a country should specialise in goods it can produce:

1. AMore cheaply in absolute terms than every other country
2. BAt a lower opportunity cost than other countries
3. CWith the most workers
4. DOnly for its own consumption

In Spence's job market signalling model, education can be valuable to employers even if it does not raise productivity because:

1. AEmployers are required by law to hire graduates
2. BIt reduces the wages employers must pay
3. CIt is less costly for high-ability workers to acquire, so it reveals their type
4. DIt guarantees that every graduate is highly productive

A liquidity trap is a situation where:

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