Economics concepts worksheet with answers

A progressive tax is one where:

1. AEveryone pays the same percentage of income
2. BThe proportion of income paid in tax rises as income rises
3. CEveryone pays the same amount of tax
4. DThe proportion of income paid falls as income rises

The current account of the balance of payments mainly records:

1. APurchases and sales of foreign companies, shares, bonds and other assets
2. BThe central bank's interest rate decisions
3. CTrade in goods and services, primary income and current transfers
4. DChanges in the government's debt

A budget deficit occurs when:

1. AGovernment spending exceeds government revenue in a year
2. BTotal government debt falls
3. CThe value of imports exceeds the value of exports in a year
4. DA firm's costs exceed its revenue

A minimum wage set above the equilibrium wage in a competitive labour market is predicted to cause:

1. ANo change in employment
2. BA surplus of labour (unemployment)
3. CA shortage of labour
4. DA fall in the wage rate

Crowding out refers to:

1. AImports replacing domestic production
2. BHigher government borrowing raising interest rates and reducing private investment
3. COvercrowded public services
4. DToo many firms entering a market

In the short run, a firm in perfect competition should shut down if the market price is below:

1. AAverage total cost
2. BAverage variable cost
3. CMarginal revenue
4. DAverage fixed cost

The Fisher effect predicts that, in the long run, a permanent 2 percentage point rise in expected inflation will:

1. ALower nominal interest rates by about 2 points
2. BRaise nominal interest rates by about 2 points, leaving real rates unchanged
3. CRaise real interest rates by about 2 points
4. DHave no effect on nominal interest rates, so real interest rates fall by about 2 points

In the Solow growth model, sustained long-run growth in output per worker comes from:

1. AA higher saving rate alone
2. BTechnological progress
3. CGovernment budget deficits
4. DPopulation growth