Economics concepts worksheet with answers

The unemployment rate is calculated as:

1. AThe number of employed divided by the labour force
2. BThe number of unemployed divided by the total population
3. CThe number of job vacancies divided by the population
4. DThe number of unemployed divided by the labour force

Market failure occurs when:

1. AThe stock market falls sharply
2. BThe free market allocates resources inefficiently
3. CPrices rise in a market
4. DA firm goes bankrupt

Deflation is:

1. AA sustained fall in the general price level
2. BA reduction in government spending
3. CA fall in the value of the currency
4. DA slowdown in the rate of inflation, with prices still rising

The income elasticity of demand for a good is -0.4. The good is:

1. AAn inferior good
2. BA complement
3. CA luxury good
4. DA normal necessity

Unemployment benefits and progressive income taxes are called automatic stabilisers because they:

1. APrevent all recessions from happening
2. BFix the exchange rate automatically
3. CKeep the government budget balanced in every year of the business cycle
4. DReduce fluctuations in demand without new government decisions

Crowding out refers to:

1. AOvercrowded public services
2. BToo many firms entering a market
3. CHigher government borrowing raising interest rates and reducing private investment
4. DImports replacing domestic production

In the Bertrand model, two firms sell identical products with the same constant marginal cost and compete on price. The equilibrium price is:

1. AEqual to marginal cost
2. BThe monopoly price
3. CHalfway between monopoly price and marginal cost
4. DZero

Akerlof's "market for lemons" explains how:

1. AAsymmetric information can drive good-quality products out of a market
2. BPublic goods are under-provided
3. CLemons become cheaper in summer
4. DMonopolies set high prices