Economics concepts worksheet with answers

A common rule of thumb defines a recession as:

1. AA year with inflation above 5%
2. BAny month with rising unemployment
3. CA fall in the stock market of 10%
4. DTwo consecutive quarters of falling real GDP

If supply increases while demand stays the same, the equilibrium price will usually:

1. AFall
2. BBecome zero
3. CStay exactly the same
4. DRise

Economies of scale occur when:

1. AA firm produces less to cut costs
2. BTotal costs fall as output increases
3. CPrices rise as the firm grows
4. DLong-run average cost falls as output increases

Unexpectedly high inflation tends to benefit:

1. ALenders who receive fixed interest payments
2. BPensioners on fixed nominal incomes
3. CBorrowers with fixed-rate loans
4. DSavers holding cash

Unemployment benefits and progressive income taxes are called automatic stabilisers because they:

1. AKeep the government budget balanced in every year of the business cycle
2. BPrevent all recessions from happening
3. CReduce fluctuations in demand without new government decisions
4. DFix the exchange rate automatically

A Gini coefficient of 0 indicates:

1. APerfect inequality of income
2. BPerfect equality of income
3. CZero unemployment
4. DZero economic growth

In the Mundell–Fleming model with perfect capital mobility and a floating exchange rate:

1. ABoth policies have no effect on output
2. BMonetary policy is effective but fiscal policy is largely ineffective
3. CBoth policies are equally effective
4. DFiscal policy is effective, but monetary policy is largely ineffective

A lump-sum tax (a fixed amount, independent of output) is imposed on a profit-maximising monopolist. In the short run, its output will:

1. AFall, because the tax raises the firm's average cost
2. BRise to make up for the tax
3. CFall to zero
4. DStay the same, because MR and MC do not change