Economics concepts worksheet with answers

A budget deficit occurs when:

1. AGovernment spending exceeds government revenue in a year
2. BA firm's costs exceed its revenue
3. CTotal government debt falls
4. DThe value of imports exceeds the value of exports in a year

GDP measures:

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

The current account of the balance of payments mainly records:

1. AChanges in the government's debt
2. BPurchases and sales of foreign companies, shares, bonds and other assets
3. CThe central bank's interest rate decisions
4. DTrade in goods and services, primary income and current transfers

A country imposes a tariff on imported steel. Which effect is most likely?

1. ADomestic steel prices fall and imports rise
2. BDomestic consumers gain surplus
3. CDomestic steel prices rise and domestic production increases
4. DThe world price of steel rises sharply for all countries that trade it

The principle of diminishing marginal utility states that:

1. AExtra satisfaction from each additional unit consumed tends to fall
2. BTotal satisfaction falls with each additional unit of the good that is consumed
3. CSatisfaction rises as income falls
4. DConsumers always prefer more expensive goods

The law of diminishing marginal returns states that:

1. AConsumers get less satisfaction as prices rise
2. BTotal output always falls as more workers are hired
3. CLong-run average costs always fall as output rises
4. DAdding more of a variable input to a fixed input eventually lowers the extra output per unit added

In the Bertrand model, two firms sell identical products with the same constant marginal cost and compete on price. The equilibrium price is:

1. AThe monopoly price
2. BEqual to marginal cost
3. CHalfway between monopoly price and marginal cost
4. DZero

The Phillips curve originally suggested:

1. AA trade-off between inflation and unemployment in the short run
2. BThat unemployment has no link to inflation
3. CThat higher taxes always reduce inflation
4. DThat inflation and unemployment always rise and fall together in the short run