Economics concepts worksheet with answers

Deflation is:

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

The basic economic problem of scarcity means that:

1. AWants are unlimited but resources to satisfy them are limited
2. BPrices are always rising over time
3. COnly poor countries need to make choices
4. DSome goods are always unavailable in shops because firms produce too little

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

1. ABecome zero
2. BRise
3. CFall
4. DStay exactly the same

A negative externality occurs when:

1. AConsumers pay more for a product than it costs the firm to produce
2. BA third party bears a cost not paid by the producer or consumer
3. CThe government taxes a product
4. DA firm makes a loss

Crowding out refers to:

1. AImports replacing domestic production
2. BHigher government borrowing raising interest rates and reducing private investment
3. COvercrowded public services
4. DToo many firms entering a market

A Gini coefficient of 0 indicates:

1. AZero unemployment
2. BZero economic growth
3. CPerfect equality of income
4. DPerfect inequality of income

The Marshall–Lerner condition states that a currency depreciation improves the trade balance if:

1. AInterest rates rise at the same time
2. BThe country has a budget surplus
3. CExports and imports have zero price elasticity
4. DThe sum of the price elasticities of demand for exports and imports exceeds 1

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. B75% above marginal cost, as a share of price
3. C25% above marginal cost, as a share of price
4. D4 times marginal cost