Exam 2: Observing and Explaining the Economy

Identify whether the following issues are macroeconomic or microeconomic and explain why you categorized them in that way. (A)The growth rate of real GDP (B)A government policy that guarantees a minimum price of agricultural goods (C)A tax on restaurant meals (D)A government policy to affect the increase in the overall price level

All of the following are examples of an economic variable except

Which of the following is not an economic issue?

The table shows the price of motor fuel (mainly gasoline) and the overall price level (the consumer price index) in five-year intervals over the period 1970 through 1990. (A)Plot a diagram of the relative price of motor fuel for the 1970-1990 period. (B)Explain what has been happening to the relative price of motor fuel over this period.

A hypothesis is

What problems would arise if economists did not make ceteris paribus assumptions when making predictions?

Consider an economic model of CD production. Represent this model graphically, algebraically, and verbally.

The ceteris paribus, or everything else held constant, assumption is used in economics primarily to identify unstable equilibrium situations.

Economics requires more of a mixture of verbal and quantitative skills than other sciences.

A newspaper editorial explaining what should be done to reduce the budget deficit is an example of

When economists explain the relationship between the price of hotdogs and the number that consumers will buy, the ceteris paribus assumption implies that

Using gasoline prices as an example, explain what a normative statement is and what a positive statement is.

A system in which the government essentially owns and controls all production is called

Explain how the distinction between positive and normative economics provides insight as to why economists do disagree.

Exhibit 2-2 -Exhibit 2-2 shows the relationship between X and Y between 1980 and 1991. Suppose this correlation between X and Y continues to hold for the next 10 years. If Y declines over the period 1993 through 1998, we would expect

A major reason for the development of new models is

Identify whether the following statements are positive or normative economic statements, and explain why you categorized them in that way. (A)"The best way to improve the economic situation would be to decrease the unemployment rate by decreasing the interest rate." (B)"The government increased taxes in order to decrease the budget deficit and improve economic growth." (C)"Taxes on businesses decreased production in some industries in the short run." (D)"The government should pursue a low-inflation policy by restraining the growth of the money supply."

An economic variable is any economic measure that

The ceteris paribus assumption is used in economics

An economic model is the same as a theory.