Economics concepts worksheet with answers

Demand is called "price elastic" when the absolute value of its price elasticity is:

1. AExactly 1
2. BExactly 0
3. CLess than 1
4. DGreater than 1

Economies of scale occur when:

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

Fiscal policy uses:

1. AExchange rate controls only
2. BTrade agreements only
3. CInterest rates set by the central bank
4. DGovernment spending and taxation

A price ceiling set below the equilibrium price typically causes:

1. ANo change in the market
2. BA shortage
3. CA surplus
4. DAn increase in supply

A public good is:

1. ANon-rival and non-excludable
2. BAny good bought by the government
3. CRival and excludable
4. DProvided only by private firms

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A8
2. B1.25
3. C0.8
4. D5

Ricardian equivalence suggests that a debt-financed tax cut will:

1. AHave little effect on spending, because households save to pay expected future taxes
2. BAlways cause inflation
3. CStrongly increase consumption, because households spend most of the tax cut through the multiplier
4. DReduce interest rates sharply

According to the quantity theory of money (MV = PY), if velocity and real output are constant, a 5% rise in the money supply leads to:

1. AAbout a 5% rise in the price level
2. BAbout a 5% rise in real output
3. CA 5% fall in velocity
4. DNo change in prices