Economics concepts worksheet with answers

Deflation is:

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

GDP measures:

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

Which statement is a normative statement?

1. AThe government should raise the minimum wage
2. BThe minimum wage rose by 3% last year
3. CUnemployment fell to 4% in June
4. DHigher prices reduce quantity demanded

Stagflation is a combination of:

1. ALow inflation and low unemployment
2. BHigh growth and falling prices
3. CHigh inflation and high unemployment with low growth
4. DDeflation and rapid growth

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A8
2. B0.8
3. C5
4. D1.25

In perfect competition in the long run, firms earn:

1. ALosses forever
2. BZero economic profit
3. CMonopoly profits
4. DLarge economic profits

The Lerner index (P − MC)/P for a profit-maximising monopolist equals 1/|PED|. If |PED| = 4, the price is:

1. A75% above marginal cost, as a share of price
2. B4 times marginal cost
3. C25% above marginal cost, as a share of price
4. DEqual to marginal cost

The J-curve effect describes why, after a depreciation, the trade balance may:

1. AImprove immediately and permanently
2. BRemain unchanged for many years
3. CImprove at first and then worsen
4. DWorsen at first and then improve