Economics concepts worksheet with answers

Price elasticity of demand measures:

1. AHow responsive quantity demanded is to a change in price
2. BHow much firms can raise their prices
3. CHow quickly prices change over time
4. DHow responsive quantity supplied is to changes in consumer income

The basic economic problem of scarcity means that:

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

Macroeconomics studies:

1. AThe economy as a whole, such as inflation, unemployment and growth
2. BThe decisions of individual households and firms in particular markets
3. CThe accounts of a single company
4. DOnly the stock market

The marginal propensity to consume is:

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

A currency depreciation tends to:

1. AReduce the price of all domestic goods and make imports cheaper
2. BMake exports cheaper abroad and imports more expensive
3. CMake imports cheaper
4. DHave no effect on trade

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

1. AIt is always split equally
2. BThe government
3. CConsumers
4. DProducers

The "Taylor principle" says that, to stabilise inflation, a central bank should respond to a 1 percentage point rise in inflation by:

1. ACutting the nominal rate
2. BRaising the nominal interest rate, but by less than 1 percentage point
3. CRaising the nominal interest rate by more than 1 percentage point
4. DKeeping the nominal rate unchanged

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

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