Economics concepts worksheet with answers

A progressive tax is one where:

1. AEveryone pays the same percentage of income
2. BThe proportion of income paid in tax rises as income rises
3. CThe proportion of income paid falls as income rises
4. DEveryone pays the same amount of tax

Fiscal policy uses:

1. AInterest rates set by the central bank
2. BGovernment spending and taxation
3. CTrade agreements only
4. DExchange rate controls only

Adam Smith's example of the pin factory illustrated the benefits of:

1. AGovernment regulation
2. BFree trade between countries
3. CPrice controls
4. DThe division of labour

In perfect competition in the long run, firms earn:

1. ALosses forever
2. BZero economic profit
3. CLarge economic profits
4. DMonopoly profits

Both supply and demand for a good increase. What can we say for certain about the new equilibrium?

1. AQuantity rises, but the change in price is uncertain
2. BBoth price and quantity fall
3. CBoth price and quantity rise
4. DPrice rises, but the change in quantity is uncertain

A Gini coefficient of 0 indicates:

1. AZero unemployment
2. BPerfect equality of income
3. CZero economic growth
4. DPerfect inequality of income

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

1. AMust have a budget surplus
2. BCannot trade with other countries
3. CCan set any interest rate it likes
4. DLoses control of independent monetary policy

Okun's law describes:

1. AA positive relationship between inflation and nominal interest rates over time
2. BA negative relationship between output growth and changes in unemployment
3. CThe link between money supply and prices
4. DThe relationship between tax rates and revenue