Economics concepts worksheet with answers

GDP measures:

1. AThe total market value of final goods and services produced in a country in a period
2. BThe value of all exports only
3. CThe government's budget
4. DThe total wealth and savings held by a country's citizens and firms at the end of a year

A tariff is:

1. AA subsidy for exporters
2. BA limit on the quantity of imports
3. CA ban on all foreign trade
4. DA tax on imported goods

Market failure occurs when:

1. APrices rise in a market
2. BThe free market allocates resources inefficiently
3. CA firm goes bankrupt
4. DThe stock market falls sharply

If the ECB raises its main interest rate, the most likely short-term effect is:

1. ALower borrowing and spending, reducing inflationary pressure
2. BAn immediate rise in GDP
3. CA fall in the value of the euro
4. DHigher borrowing and spending, which adds to inflationary pressure

Overfishing in international waters is an example of:

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

The marginal propensity to consume is:

1. AThe average share of total income that households save over a year
2. BThe share of an extra euro of income that is spent on consumption
3. CThe total consumption in an economy
4. DThe interest rate on consumer loans

In the Prisoner's Dilemma, the Nash equilibrium is:

1. ABoth players defect, even though both cooperating would be better
2. BOne player cooperates and the other defects, so only one of them gains
3. CThere is no equilibrium
4. DBoth players cooperate

The "paradox of thrift" suggests that if all households try to save more during a recession:

1. AInflation will increase
2. BInterest rates will rise sharply
3. CTotal income may fall, so total saving does not rise
4. DInvestment and growth will rise immediately