Economics concepts worksheet with answers

Unemployment caused by people moving between jobs is called:

1. ASeasonal unemployment
2. BStructural unemployment
3. CCyclical unemployment
4. DFrictional unemployment

A common rule of thumb defines a recession as:

1. ATwo consecutive quarters of falling real GDP
2. BAny month with rising unemployment
3. CA year with inflation above 5%
4. DA fall in the stock market of 10%

Fixed costs are costs that:

1. ACan be avoided entirely by producing nothing in the short run
2. BRise in proportion to each unit produced
3. CDo not change with the level of output in the short run
4. DAre paid only when the firm makes a profit

A sharp rise in world oil prices leading to higher inflation is an example of:

1. ADemand-pull inflation
2. BDisinflation
3. CCost-push inflation
4. DDeflation

Crowding out refers to:

1. AToo many firms entering a market
2. BOvercrowded public services
3. CHigher government borrowing raising interest rates and reducing private investment
4. DImports replacing domestic production

A firm has spent €1 million on research for a product that now looks unprofitable. When deciding whether to continue, the €1 million should be:

1. AIgnored, because it is a sunk cost
2. BAdded to the expected future costs
3. CRecovered by raising prices
4. DTreated as the opportunity cost of stopping

Why is the real-world government spending multiplier usually smaller than the simple 1/(1 − MPC)?

1. AConsumers never spend extra income
2. BGovernments cannot borrow money
3. CThe MPC is always above 1
4. DTaxes, imports and crowding out leak part of each round of spending

Which is a key difference between the CPI and the GDP deflator?

1. AThe GDP deflator includes imported goods; the CPI does not
2. BThe CPI covers investment goods; the GDP deflator does not
3. CThe CPI includes prices of imported consumer goods; the GDP deflator covers only domestically produced goods
4. DThey always give exactly the same inflation rate