Economics concepts worksheet with answers

A good for which demand rises when income rises is called:

1. AAn inferior good
2. BA normal good
3. CA public good
4. DA Giffen good

GDP measures:

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

The Consumer Price Index (CPI) measures:

1. AThe changing cost of a fixed basket of goods and services bought by households
2. BThe total value of goods produced in a country
3. CThe interest rate charged by banks
4. DThe prices that firms pay for raw materials and other inputs used in their production

Rising consumer confidence would most likely:

1. AShift aggregate demand to the left
2. BShift aggregate supply to the left
3. CHave no effect on the economy
4. DShift aggregate demand to the right

A savings account pays a nominal interest rate of 6% and inflation is 4%. The approximate real interest rate is:

1. A24%
2. B1.5%
3. C2%
4. D10%

A currency depreciation tends to:

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

A Giffen good is one where:

1. AThe price never changes
2. BQuantity demanded rises when its price rises, because a strong income effect outweighs the substitution effect
3. CDemand rises because the good is a status symbol
4. DDemand rises with income, like most goods

The "convergence hypothesis" from the Solow model predicts that:

1. AAll countries will eventually have the same population
2. BRich countries always grow faster than poor ones, because they have more capital
3. CExchange rates converge to a fixed value
4. DPoorer countries with similar fundamentals tend to grow faster than richer ones