Economics concepts worksheet with answers

Macroeconomics studies:

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

A market with only one seller is called:

1. AA monopsony
2. BPerfect competition
3. CAn oligopoly
4. DA monopoly

Market failure occurs when:

1. AA firm goes bankrupt
2. BThe free market allocates resources inefficiently
3. CPrices rise in a market
4. DThe stock market falls sharply

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

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

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. BConsumers
3. CIt is always split equally
4. DProducers

If the ECB raises its main interest rate, the most likely short-term effect is:

1. AHigher borrowing and spending, which adds to inflationary pressure
2. BAn immediate rise in GDP
3. CLower borrowing and spending, reducing inflationary pressure
4. DA fall in the value of the euro

The "paradox of thrift" suggests that if all households try to save more during a recession:

1. ATotal income may fall, so total saving does not rise
2. BInvestment and growth will rise immediately
3. CInterest rates will rise sharply
4. DInflation will increase

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

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