Economics concepts worksheet with answers

Fiscal policy uses:

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

A progressive tax is one where:

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

The phrase "ceteris paribus" means:

1. AThe price is fixed
2. BThe government does not intervene
3. CSupply equals demand
4. DOther things being equal

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

1. AA luxury good
2. BA complement
3. CA normal necessity
4. DAn inferior good

If demand for a product is price inelastic, a price increase will:

1. ADecrease total revenue
2. BLeave total revenue unchanged
3. CReduce quantity demanded to zero
4. DIncrease total revenue

A per-unit tax is placed on a good with very inelastic demand and elastic supply. Who bears most of the tax burden?

1. AThe government
2. BIt is always split equally
3. CConsumers
4. DProducers

Okun's law describes:

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

According to prospect theory (Kahneman and Tversky), people typically:

1. AFeel losses more strongly than equal-sized gains
2. BAlways maximise expected monetary value
3. CTreat losses and gains of the same size as equally important
4. DPrefer risk when facing gains of any size