Economics concepts worksheet with answers

Deflation is:

1. AA sustained fall in the general price level
2. BA reduction in government spending
3. CA fall in the value of the currency
4. DA slowdown in the rate of inflation, with prices still rising

According to the law of demand, when the price of a normal good rises (other things equal):

1. AThe quantity demanded falls
2. BDemand shifts to the right
3. CThe quantity demanded rises
4. DSupply falls

GDP measures:

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

A Nash equilibrium is a situation where:

1. AAll players achieve the highest possible total payoff
2. BOne player has won and the others have lost
3. CThe players agree to cooperate through a binding contract that maximises their combined total payoff
4. DNo player can improve their payoff by changing strategy alone, given the others' strategies

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

The price of a good rises by 10% and quantity demanded falls by 20%. The price elasticity of demand is:

1. A-2, so demand is inelastic
2. B-2, so demand is elastic
3. C-0.5, so demand is elastic
4. D-0.5, so demand is inelastic

The Phillips curve originally suggested:

1. AThat inflation and unemployment always rise and fall together in the short run
2. BThat higher taxes always reduce inflation
3. CA trade-off between inflation and unemployment in the short run
4. DThat unemployment has no link to inflation

For a normal good, when its price falls, the substitution effect and income effect:

1. ACancel out exactly
2. BBoth decrease the quantity demanded
3. CWork in opposite directions
4. DBoth increase the quantity demanded