Question 1

Economics is mainly concerned with financial issues.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is considered a macroeconomic question?

Accepted Answer

A)  How can one particular firm maximize profits? 
B)  What is the impact of competition on the profits of a business? 
C)  How can economic policy fight inflation? 
D)  How does a family allocate income among various available goods and services? 
E)  What factors determine the wage rate in a certain industry? 
A)  How can one particular firm maximize profits? 
B)  What is the impact of competition on the profits of a business? 
C)  How can economic policy fight inflation? 
D)  How does a family allocate income among various available goods and services? 
E)  What factors determine the wage rate in a certain industry?

Question 3

An economic model is a tool used to help us understand the real world.

Accepted Answer

A) True 
 B)False

Question 4

When people survey economists' beliefs, they find

Accepted Answer

A)  a surprising amount of agreement. 
B)  that economists act as if they are not human. 
C)  that economists lack moral beliefs. 
D)  that, for every economist, they get two different answers. 
E)  more disagreement than expected. 
A)  a surprising amount of agreement. 
B)  that economists act as if they are not human. 
C)  that economists lack moral beliefs. 
D)  that, for every economist, they get two different answers. 
E)  more disagreement than expected.

Question 5

Economic models

Accepted Answer

A)  are not complicated because the behavior they describe is not complicated. 
B)  require either algebra or graphs. 
C)  are complicated because human behavior is complicated. 
D)  are simplifications of the phenomena they attempt to explain. 
E)  need to be the same as the phenomena they describe. 
A)  are not complicated because the behavior they describe is not complicated. 
B)  require either algebra or graphs. 
C)  are complicated because human behavior is complicated. 
D)  are simplifications of the phenomena they attempt to explain. 
E)  need to be the same as the phenomena they describe.

Question 6

Economics has always been a good example of an experimental science.

Accepted Answer

A) True 
 B)False

Question 7

Macroeconomics deals with large industries such as the health-care industry.

Accepted Answer

A) True 
 B)False

Question 8

To determine causality in many sciences, researchers

Accepted Answer

A)  check for correlation. 
B)  use scatter diagrams. 
C)  perform controlled experiments. 
D)  plot the variables against time or location. 
E)  use only a small amount of data. 
A)  check for correlation. 
B)  use scatter diagrams. 
C)  perform controlled experiments. 
D)  plot the variables against time or location. 
E)  use only a small amount of data.

Question 9

Economics

Accepted Answer

A)  can only be used objectively. 
B)  cannot be practiced as a science unless it uses controlled experiments. 
C)  is always practiced as a science. 
D)  is not always used objectively. 
E)  can never be used objectively. 
A)  can only be used objectively. 
B)  cannot be practiced as a science unless it uses controlled experiments. 
C)  is always practiced as a science. 
D)  is not always used objectively. 
E)  can never be used objectively.

Question 10

If the price of gasoline decreases but not as much as the decrease in the average price of other goods and services, then the relative price of gasoline

Accepted Answer

A)  cannot be determined. 
B)  decreases. 
C)  remains the same. 
D)  increases. 
E)  increases or decreases, depending on the price of automobiles. 
A)  cannot be determined. 
B)  decreases. 
C)  remains the same. 
D)  increases. 
E)  increases or decreases, depending on the price of automobiles.

Question 11

A positive statement is necessarily a subjective statement.

Accepted Answer

A) True 
 B)False

Question 12

Suppose an economic study shows that increasing the tax rate on beer will reduce the amount of traffic accidents. Which of the following statements can be valid based on the study because they are positive statements, and which cannot be valid because they are normative statements.
(A)"Increasing the tax rate on beer is a method of reducing traffic accidents."
(B)"If the government wishes to reduce traffic accidents, it ought to raise the beer tax."
(C)"The government should not raise the beer tax on low-income drinkers."

Accepted Answer

(A)Positive statemen

Question 13

Economic models differ from those in the physical sciences because

Accepted Answer

A)  they are usually more difficult than models in the physical sciences. 
B)  economics has nothing to do with anything physical. 
C)  they are less difficult than those in the physical sciences. 
D)  they attempt to explain human behavior. 
E)  economics relies on controlled experiments. 
A)  they are usually more difficult than models in the physical sciences. 
B)  economics has nothing to do with anything physical. 
C)  they are less difficult than those in the physical sciences. 
D)  they attempt to explain human behavior. 
E)  economics relies on controlled experiments.

Question 14

"Inflation is a more serious problem than unemployment." This statement is an example of

Accepted Answer

A)  a normative statement. 
B)  the fallacy of composition. 
C)  a positive statement. 
D)  microeconomics. 
E)  macroeconomics. 
A)  a normative statement. 
B)  the fallacy of composition. 
C)  a positive statement. 
D)  microeconomics. 
E)  macroeconomics.

Question 15

A market economy in which the government plays some role is called

Accepted Answer

A)  capitalism. 
B)  socialism. 
C)  communism. 
D)  a laissez faire system. 
E)  a mixed economy. 
A)  capitalism. 
B)  socialism. 
C)  communism. 
D)  a laissez faire system. 
E)  a mixed economy.

Question 16

Exhibit 2-1  
-Exhibit 2-1 shows movements of two variables, X and Y, from 1980 through 1991. From this diagram the most one can conclude is that

Accepted Answer

A)  X and Y are positively correlated with each other. 
B)  X and Y are negatively correlated with each other. 
C)  X and Y are positively correlated with each other and either X causes Y or Y causes X. 
D)  we cannot say anything about how X and Y are related because we do not know the units of measurement for X and Y. 
E)  X and Y are not correlated with each other. 
A)  X and Y are positively correlated with each other. 
B)  X and Y are negatively correlated with each other. 
C)  X and Y are positively correlated with each other and either X causes Y or Y causes X. 
D)  we cannot say anything about how X and Y are related because we do not know the units of measurement for X and Y. 
E)  X and Y are not correlated with each other.

Question 17

Considering the role government plays, what term best describes the U.S. economy? Why?

Accepted Answer

The U.S. economy is a mixed ec

Question 18

A laissez faire system is an economy with many government regulations.

Accepted Answer

A) True 
 B)False

Question 19

When economists do disagree, the disagreement usually pertains to

Accepted Answer

A)  positive issues. 
B)  normative issues. 
C)  theoretical issues. 
D)  minor issues. 
E)  just about any economic topic. 
A)  positive issues. 
B)  normative issues. 
C)  theoretical issues. 
D)  minor issues. 
E)  just about any economic topic.

Question 20

A microeconomic model must be much smaller in size than a macroeconomic model.

Accepted Answer

A) True 
 B)False

Exam 2: Observing and Explaining the Economy

Economics is mainly concerned with financial issues.

Which of the following is considered a macroeconomic question?

An economic model is a tool used to help us understand the real world.

When people survey economists' beliefs, they find

Economic models

Economics has always been a good example of an experimental science.

Macroeconomics deals with large industries such as the health-care industry.

To determine causality in many sciences, researchers

Economics

If the price of gasoline decreases but not as much as the decrease in the average price of other goods and services, then the relative price of gasoline

A positive statement is necessarily a subjective statement.

Economic models differ from those in the physical sciences because

"Inflation is a more serious problem than unemployment." This statement is an example of

A market economy in which the government plays some role is called

Exhibit 2-1 -Exhibit 2-1 shows movements of two variables, X and Y, from 1980 through 1991. From this diagram the most one can conclude is that

Considering the role government plays, what term best describes the U.S. economy? Why?

A laissez faire system is an economy with many government regulations.

When economists do disagree, the disagreement usually pertains to

A microeconomic model must be much smaller in size than a macroeconomic model.

The Central Idea

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters