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WorksheetsEconomics Worksheet: Inflation, Recession, and Policy Questions
Total questions: 135
Worksheet time: 1hrs 11mins
Which of the following best explains why rent controls, when implemented, have often led to housing shortages in the past?
They increase demand while also discouraging landlords from maintaining properties and new construction.
They encourage landlords to build more luxury apartments.
They reduce the demand for rental housing by making it more expensive.
They make it easier for landlords to evict tenants at will.
Which of the following best explains the potential costs and benefits of implementing a nationwide student loan forgiveness program?
Benefits include reduced borrower debt and increased spending, while costs include taxpayer funding, higher taxes, and future borrowing expectations.
Benefits include increased government revenue and reduced taxes, while costs include higher student enrollment rates.
Benefits include lower interest rates for all loans, while costs include reduced access to education.
Benefits include more private lending options, while costs include decreased federal support for students.
Which of the following was a main factor that contributed to inflation exceeding 9% in 2022 (may be more than one correct answer)?
Increased government spending and stimulus packages during the pandemic, which boosted consumer demand while simultaneously straining supply chains and labor markets, + disincentives for some workers to return to work.
A significant decrease in global oil prices, leading to lower transportation costs.
A widespread reduction in consumer demand due to increased savings rates.
A major technological breakthrough that drastically reduced production costs across industries.
Which of the following factors most contributed to the onset of the Great Recession of 2007-2009?
A combination of all of the above, as well as the failure to address the growing risks in the financial system under both Clinton and Bush administrations.
The rapid growth of the technology sector and dot-com companies.
A sudden increase in global oil prices due to geopolitical tensions.
Major natural disasters affecting key financial centers.
Which of the following is most likely to occur if the government imposes price controls on groceries, such as a price ceiling to limit how much grocers can charge?
A shortage of groceries may occur, as demand exceeds the quantity producers are willing to supply at the lower price.
Grocers will increase the quality of groceries to attract more customers.
The supply of groceries will increase as producers are incentivized by higher profits.
Consumers will buy fewer groceries because prices are too high.
If the price of Michigan Football tickets decreased by 50% and the quantity demanded increased by 10, what economic principle does this illustrate? (There may be multiple correct answers.)
The price effect
The law of supply
The law of diminishing returns
The principle of opportunity cost
Which of the following scenarios could lead to the situation depicted in the graph?
Government-imposed price controls on gasoline during the 1970s, which set a maximum price below market equilibrium, led to shortages as demand exceeded supply.
A sudden increase in gasoline production due to technological advancements, resulting in a surplus.
A decrease in consumer demand for gasoline due to the popularity of electric vehicles, causing excess supply.
A government subsidy on gasoline that lowers the price and increases supply beyond demand.
Notre Dame Football has a winning season. More and more people desire to attend games. This explains what?
Increase in demand
Decrease in supply
Decrease in demand
Increase in supply
Which of the following most contributed to the slow recovery from the Great Recession?
Focus on government spending without enough private sector incentives.
Rapid increase in global oil prices.
Excessive private sector investment.
Strong growth in the housing market.
Which of the following contributed most to ending the Great Depression?
Increased demand from World War II spending and industrial production
The stock market crash of 1929
The Dust Bowl migration
Prohibition laws
Which of the following was the primary cause of the Great Recession of 2007-2009?
A collapse in the housing market due to risky mortgage lending and subprime loans
A sudden increase in oil prices
A major technological failure in the banking system
A global pandemic
Which of the following factors most contributed to the recent surge in inflation, particularly during the pandemic recovery period?
Increased consumer demand from government stimulus, supply chain disruptions, and worker shortages due to disincentives to return to work.
Decreased government spending and increased savings rates among consumers.
Stable supply chains and a surplus of available workers.
Lower energy prices and reduced transportation costs.
One potential consequence of national debt is that future taxpayers may face:
Higher taxes, as the government needs to generate revenue to pay interest on the debt
Lower taxes, as the government will have surplus funds
No change in taxes, as debt does not affect government revenue needs
Immediate debt forgiveness for all citizens
Which of the following best explains why people might not save enough for retirement, even though they know it’s in their long-term interest?
They exhibit present bias, giving more weight to immediate rewards than future benefits
They have unlimited financial resources and do not need to save
They believe retirement will never happen to them
They are required by law to spend all their income each year
Which of the following is most likely to encourage economic efficiency and lower consumer prices?
Maintaining low taxes and allowing market forces to allocate resources efficiently
Increasing government intervention in all sectors of the economy
Imposing high tariffs on imported goods
Setting price controls on essential commodities
What is one benefit of lowering corporate tax rates in an economy?
More capital investment and job creation in the private sector
Reduced consumer spending due to higher prices
Increased government spending on welfare programs
Decreased foreign investment in the country
Which of the following is an argument in favor of protectionism through tariffs?
Tariffs can stimulate domestic production and reduce unemployment
Tariffs always lead to lower consumer prices
Tariffs guarantee international peace
Tariffs eliminate the need for government regulation
What is one reason why some economists argue that tariffs can be beneficial for national security?
Tariffs help prevent the over-dependence on foreign suppliers for critical goods.
Tariffs always reduce the cost of imported goods.
Tariffs guarantee higher quality products from abroad.
Tariffs eliminate the need for domestic production entirely.
If the central bank wants to reduce inflation, it would most likely:
Raise interest rates
Lower interest rates
Increase government spending
Print more money
A country’s GDP increased from 1trillionto 1.2 trillion. If the inflation rate was 5%, how could one determine the real GDP growth rate?
Real GDP growth = (GDP growth - Inflation rate)
Real GDP growth = (GDP growth + Inflation rate)
Real GDP growth = (GDP growth × Inflation rate)
Real GDP growth = (GDP growth ÷ Inflation rate)
Which of the following is most likely to cause an increase in inflation?
An increase in government spending without a corresponding increase in taxes.
A decrease in consumer demand for goods and services.
A reduction in the money supply by the central bank.
A fall in global oil prices.
The natural rate of unemployment is:
The rate of unemployment that occurs when the economy is at full employment.
The rate of unemployment during a recession.
The rate of unemployment when inflation is zero.
The rate of unemployment caused by government policies.
Which of the following will cause the equilibrium price to increase, if demand stays the same?
Increase in marginal costs.
Decrease in marginal costs.
Decrease in supply.
Decrease in demand.
What could cause the supply curve to increase (shift right)?
Decrease in marginal costs.
Increase in input prices.
Decrease in technology efficiency.
Increase in taxes on production.
If a business produces 20 squishies, it costs 40 cents to produce each squishy. However, the 21st squishy produced costs 50 cents to produce. What explains this rise in cost?
Increase in marginal costs
Decrease in fixed costs
Improvement in technology
Reduction in demand
Sarah is putting equal amounts of money at regular intervals into her investment. What is this called?
Dollar cost averaging
Market timing
Lump sum investing
Value investing
Imagine a new, fuel-efficient car model is released, causing a significant decrease in the demand for gasoline. Additionally, the price of gasoline also increases by 10%. Both a change in demand due to the new car model and a change in quantity demanded due to the price increase. The price of gasoline increases by 10%. In response, consumers purchase 5% less gasoline. This scenario describes:
Only a change in quantity demanded
Only a change in demand
Both a change in demand and a change in quantity demanded
Neither a change in demand nor a change in quantity demanded
An investor decides to invest a fixed amount of money every month into a specific stock, regardless of the current stock price. This strategy is most closely associated with:
Dollar Cost Averaging
Value Investing
Growth Investing
Market Timing
A technological breakthrough reduces the cost of producing wheat. This scenario describes a:
Change in supply
Change in demand
Change in equilibrium price
Change in consumer preference
A new fitness craze emerges, leading to a surge in demand for athletic wear. This scenario describes a:
Change in demand
Change in supply
Equilibrium price
Price ceiling
The price of oranges increases. As a result, consumers buy fewer oranges. This scenario describes a:
Change in quantity demanded
Change in supply
Change in market equilibrium
Change in consumer income
Factory A can produce 10 shirts and 2 hats per hour. Factory B can produce 5 shirts and 8 hats per hour. Why may Factory A might still choose to trade with Factory B, even though it can produce more of both goods?
Comparative advantage
Absolute advantage
Economies of scale
Scarcity
If the US Dollar appreciates (rises in value) relative to the Japanese Yen, it would likely lead to:
An increase in imported Japanese goods to the U.S.
A decrease in imported Japanese goods to the U.S.
A decrease in U.S. exports to Japan.
No effect on trade between the U.S. and Japan.
Some economists argue that free trade, even with temporary job losses in certain sectors, can lead to:
Job creation in other, more competitive industries.
Permanent unemployment across all sectors.
A complete collapse of the economy.
Elimination of all international trade.
Protectionist policies, like tariffs, are often implemented to:
Protect domestic jobs in threatened industries.
Increase international competition.
Reduce government spending.
Promote free trade.
If countries trade based on comparative advantage, what is a likely outcome?
The overall production of goods will increase globally.
Countries will produce less and import more.
Trade will decrease between countries.
All countries will have the same resources.
The consumer price index (CPI) ______
is used to measure the price level of 400 goods and services (inflation)
is a measure of national income
is used to calculate unemployment rate
is a tool for measuring GDP growth
According to the circular flow model of the free market economy, if a person buys a good from outside the US, what could happen?
Unemployment could rise in the U.S.
Inflation could immediately double in the U.S.
The U.S. dollar would be discontinued.
All U.S. businesses would close.
What are the three economic questions? (more than one answer)
what to produce?
how to distribute wealth?
who will benefit?
how to maximize profit?
Pools your money with other investors and invests it into a variety of stocks and/or bonds.
mutual fund
savings account
certificate of deposit
checking account
The main goal of trade organizations is to
promote free trade amongst members
increase tariffs on imports
restrict trade between countries
focus only on domestic trade
Allows investors to trade stock electronically rather than going to a physical space.
NASDAQ
New York Stock Exchange
London Stock Exchange
Tokyo Stock Exchange
An example(s) of protectionism (could be more than one)
tariff
free trade agreement
deregulation
open borders
If the government sets the price below equilibrium, the quantity supplied will?
decrease
increase
remain the same
become zero
If inflation is on the rise, how could the Federal Reserve combat the rising prices?
increase interest rates
decrease interest rates
print more money
reduce taxes
The practice of investing a fixed dollar amount on a regular basis, regardless of the share price.
dollar cost averaging
market timing
buy and hold
value investing
The change in total production cost that comes from making or producing one additional unit.
marginal cost
fixed cost
average cost
total cost
What happens at the product market according to the circular flow diagram of the free market?
Households buy goods and services from businesses and pay the business (firm), which represents revenue for the business.
Businesses buy goods and services from households and pay them wages.
The government collects taxes from businesses and households at the product market.
Households provide labor to businesses at the product market.
An economic system is ?
the way a nation uses scarce resources to produce goods and services
a type of government
a method for measuring population growth
a system for organizing sports events
If you miss a lot of your credit card payments, which of the 3C's would it affect?
character
capacity
capital
collateral
What was the North American Free Trade Agreement (NAFTA)?
allowed free trade between Canada, U.S., and Mexico
created a military alliance between Canada, U.S., and Mexico
established a single currency for North America
banned trade between Canada, U.S., and Mexico
Putting money into a variety of investments like stocks, bonds, mutual funds, real estate, etc. to minimize risk is known as ?
diversification
speculation
concentration
arbitrage
A nation with an absolute advantage has
the ability to carry out a particular economic activity more efficiently than another individual or group
the largest population in the region
the highest level of government spending
the most advanced technology in the world
A nation with a comparative advantage has
ability to produce a particular good or service at a lower opportunity cost than its trading partners
ability to produce more goods than any other nation
the highest level of technology in the world
the largest population among trading nations
If the US dollar is strong on world markets, what could occur? (can have more than one answer)
travel to US will decrease
US exports will become cheaper
foreign goods will become more expensive for Americans
US imports will decrease
When imports exceed exports a nation has a
trade deficit
trade surplus
balanced budget
economic boom
To have demand, a person must be _____ and ______ to buy it.
able, willing
rich, generous
smart, quick
old, young
Which of the following is an example of the resource market?
land, labor, and capital are sold to entrepreneurs in exchange for income
finished goods are sold to consumers in exchange for money
government provides public goods to citizens
consumers purchase services from businesses
The current Chair of the Federal Reserve
Jerome Powell
Janet Yellen
Ben Bernanke
Alan Greenspan
Which is fiscal policy?
taxes
interest rates
exchange rates
money supply
Which is monetary policy?
interest rates
tax rates
government spending
import tariffs
If consumers are less confident, what could happen to GDP?
shrink
grow
remain unchanged
double
The most accurate economic indicator according to economists
real GDP
nominal GDP
unemployment rate
inflation rate
An online article says that the gov't implemented an expansionary fiscal policy. They most likely did which of the following?
lowered taxes
raised taxes
cut government spending
increased interest rates
An economic system that has some degree of government control, such as a federal banking system or minimum wage laws set by the government, would be considered a
mixed economy
traditional economy
market economy
command economy
Scarcity impacts (pick best answer)
(a)
Which of the following is considered land?
(a)
If the price goes down and the quantity demanded increases a great degree, economists call that good
elastic
inelastic
static
volatile
What is the name given for the market price?
equilibrium
monopoly
inflation
recession
Are all tradeoffs opportunity costs?
Yes
No
What is the main goal of an entrepreneur?
make a profit
work for someone else
avoid taking risks
focus only on charity
ignore market needs
Which does NOT change demand
number of suppliers
consumer preferences
price of the good
income levels
Another name for factors of production is
resources
products
consumers
services
String, boats, and fishing poles are examples of
physical capital
natural resources
human capital
entrepreneurship
Which is NOT a factor of production?
land
labor
capital
demand
Which savings option has the most restrictions?
CD
Savings Account
Money Market Account
Checking Account
How many opportunity costs are there to every decision?
one
two
three
four
What should a seller do if the demand for his good is inelastic in order to increase total revenue?
raise the price
lower the price
keep the price unchanged
offer discounts
What is the main goal of a business in a market economy?
earn a profit
provide charity
increase government control
reduce competition
improve public safety
Some might say a positive to a market economy is
Inflation (may have more than one correct answer)
erodes purchasing power
increases purchasing power
has no effect on money
makes goods free
A tariff is a tax on
imports
exports
income
property
One reason a nation may not like protectionism
tariffs can make goods more expensive
it increases international cooperation
it lowers the quality of domestic products
it encourages free trade
Moving from point D to point B would represent
opportunity cost
economic growth
scarcity
equilibrium
What is the result of the following graph, illustrating a gov't price control?
shortage
surplus
equilibrium
price hike
This situation should lead to ___ and ___ or it would lead to a ______.
lower prices, higher quantity, surplus
higher prices, lower quantity, shortage
higher prices, higher quantity, equilibrium
lower prices, lower quantity, shortage
This graph shows
increase in supply
decrease in supply
increase in demand
decrease in demand
A cause of this graph could be
more sellers enter the market for the good
a decrease in consumer income
an increase in production costs
a government-imposed price floor
X is impossible to reach due to scarcity
scarcity
abundance
availability
excess
What is the name given to point A?
underutilization
equilibrium
scarcity
efficiency
What is a cause for point A?
laziness
hunger
excitement
confusion
What is the opportunity cost of moving from point C to point D?
some butter
some cheese
some milk
some bread
The following graph is known as a
price ceiling
price floor
equilibrium price
market surplus
The price effect is large when demand is
elastic
inelastic
unitary
perfectly inelastic
According to the graph, a price of $1 in this market would lead to
excess demand
excess supply
market equilibrium
no change in quantity demanded
According to the graph, a change from 5to 1 sees a quantity change of 400. This is an example of
law of demand
law of supply
market equilibrium
price elasticity
The graph illustrates the
price effect
income effect
substitution effect
demand curve
According the the graph, a price of $4 in this market would lead to a
surplus of 30
shortage of 30
equilibrium
surplus of 10
A gov't enacted price floor, such as an increase in the minimum wage, leads to
excess supply
excess demand
market equilibrium
decreased production
Price ceilings lead to
shortage
surplus
equilibrium
inflation
Rent control is an example of
A price floor
A price ceiling
Market Demand
Price Demands
Why is it often difficult for the government to end price controls?
Politicians are reluctant to repeal price control when voters support them.
Many people believe that price controls further the goal of economic equity
People often pressure the government to intervene when prices rise and fall
All answers are correct
One example of when the government might impose rationing is
when it establishes a minimum wage for labor.
when farmers have produced more grains than people demand.
when it hopes to stimulate the economy by urging people to spend money.
when essential, but high-demand, goods are in short supply.
To help the economy grow, the government can
Increase taxes
Increase spending
Decrease spending
Increase interest rates
What does the government get from businesses and households?
Captial
Land
Taxes
Wages
What typical tactic was used by the government to protect the US economy?
Printing more money
Raising Tariffs
Embargo
Creating government jobs
Why would a government impose a tariff?
to reduce the average prices of certain goods
to reduce the amount of taxes that consumers pay
to protect its economy from foreign direct investment
to protect domestic businesses from foreign competition
How can the government of Australia BEST contribute to the overall human capital of its citizens and improve its economy?
by investing in the Australian transportation system
by investing in the Australian public education system
by reducing the income tax rate on Australian citizens
This is a system in which the government allocates goods and services using factors other than price.
Black Market
Rationing
Free Enterprise
None of these
This is a system in which the government allocates goods and services using factors other than price.
Black Market
Rationing
Free Enterprise
None of these
How can the government of Australia BEST contribute to the overall human capital of its citizens and improve its economy?
by investing in the Australian transportation system
by investing in the Australian public education system
by reducing the income tax rate on Australian citizens
Agri. co., an agricultural company that grants loans to farmers, is controlled by the state.
private
public
Agri. co., an agricultural company that grants loans to farmers, is controlled by the state.
private
public
Why might citizens be unhappy if the government decides to let the economy self-correct?
takes too long
leads to more national debt
increases taxes
cuts govt program funding
Why might citizens be unhappy if the government decides to let the economy self-correct?
takes too long
leads to more national debt
increases taxes
cuts govt program funding
A government payment that supports a business or market
Complement
subsidy
excise tax
sustitute
A government payment that supports a business or market
Complement
subsidy
excise tax
sustitute
A government payment that supports a business or market
Regulation
Subsidy
Excise Tax
Welfare
What does the law of supply and demand state?
The price of a good rises as the supply increases.
The price of a good falls when demand decreases.
The price of a good adjusts to bring the quantity supplied and quantity demanded into balance.
The supply of a good will decrease as its price decreases.
A government payment that supports a business or market
Regulation
Subsidy
Excise Tax
Welfare
Government intervenes in a market economy when _________________.
the perceived costs of a government policy outweigh the benefits
the perceived benefits of a government policy outweigh the anticipated costs
it wants to
daily
Adam Smith encourages a market economy to limit the role of the government, because when the government interferes in the economy there is a negative impact on
consumers only
producers only
growth
public support for the government
Adam Smith encourages a market economy to limit the role of the government, because when the government interferes in the economy there is a negative impact on
consumers only
producers only
growth
public support for the government
Government intervenes in a market economy when _________________.
the perceived costs of a government policy outweigh the benefits
the perceived benefits of a government policy outweigh the anticipated costs
it wants to
daily
If the government had a hiring freeze it would directly affect the ____________.
Product Market
Factor Market
Government
people
The governments of these two Asian nations are examples of governments who restrict the economic freedoms of their citizens:
France & Egypt
Japan & Alaska
India & China
China & North Korea
The governments of these two Asian nations are examples of governments who restrict the economic freedoms of their citizens:
France & Egypt
Japan & Alaska
India & China
China & North Korea
takeover of property or resources by the government
nationalization
apartheid
ahimsa
civil disobedience
takeover of property or resources by the government
nationalization
apartheid
ahimsa
civil disobedience
If the government had a hiring freeze it would directly affect the ____________.
Product Market
Factor Market
Government
people
