Economics concepts worksheet with answers

Inflation is:

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

If supply increases while demand stays the same, the equilibrium price will usually:

1. AStay exactly the same
2. BFall
3. CRise
4. DBecome zero

Macroeconomics studies:

1. AThe economy as a whole, such as inflation, unemployment and growth
2. BThe decisions of individual households and firms in particular markets
3. COnly the stock market
4. DThe accounts of a single company

In the long run in monopolistic competition, firms typically:

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

In an oligopoly, firms are typically:

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

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

1. A2.5%
2. B10%
3. C3%
4. D7%

In the Mundell–Fleming model with perfect capital mobility and a floating exchange rate:

1. AMonetary policy is effective but fiscal policy is largely ineffective
2. BFiscal policy is effective, but monetary policy is largely ineffective
3. CBoth policies have no effect on output
4. DBoth policies are equally effective

Why is the real-world government spending multiplier usually smaller than the simple 1/(1 − MPC)?

1. AGovernments cannot borrow money
2. BThe MPC is always above 1
3. CTaxes, imports and crowding out leak part of each round of spending
4. DConsumers never spend extra income