Question 1

Economics is the study of people making choices faced with the problem of unlimited wants and limited resources.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is the best definition of economics?

Accepted Answer

A) Economics is the study of how to manage corporations to generate the greatest return on shareholder investment. 
B) Economics is the study of how to manage city and country government to generate the greatest good to its citizens. 
C) Economics is the study of how society chooses to allocate its scarce resources. 
D) Economics is the study of how to track revenues and costs within a business. 
A) Economics is the study of how to manage corporations to generate the greatest return on shareholder investment. 
B) Economics is the study of how to manage city and country government to generate the greatest good to its citizens. 
C) Economics is the study of how society chooses to allocate its scarce resources. 
D) Economics is the study of how to track revenues and costs within a business. C

Question 3

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a (n)____ economic statement, and the labor head's statement is a (n)____ economic statement.

Accepted Answer

A) normative; normative 
B) normative; positive 
C) positive; normative 
D) positive; positive 
E) proper; improper 
A) normative; normative 
B) normative; positive 
C) positive; normative 
D) positive; positive 
E) proper; improper C

Question 4

Which of the following would eliminate scarcity as an economic problem?

Accepted Answer

A) Moderation of people's competitive instincts. 
B) Discovery of sufficiently large new energy reserves. 
C) Resumption of steady productivity growth. 
D) None of these. 
A) Moderation of people's competitive instincts. 
B) Discovery of sufficiently large new energy reserves. 
C) Resumption of steady productivity growth. 
D) None of these.

Question 5

Which of the following is a macroeconomic subject?

Accepted Answer

A) Shipping rates. 
B) Price of corporate stock. 
C) Market price of Japanese cars. 
D) Unemployment rate in the nation. 
A) Shipping rates. 
B) Price of corporate stock. 
C) Market price of Japanese cars. 
D) Unemployment rate in the nation.

Question 6

Determining the price of compact discs is a concern of:

Accepted Answer

A) macroeconomics. 
B) microeconomics. 
C) both macroeconomics and microeconomics. 
D) neither macroeconomics nor microeconomics. 
A) macroeconomics. 
B) microeconomics. 
C) both macroeconomics and microeconomics. 
D) neither macroeconomics nor microeconomics.

Question 7

Which of the following is true of resources?

Accepted Answer

A) Resources are inputs used to produce goods and services. 
B) Labor is the mental and physical capacity of workers to produce goods and services. 
C) Entrepreneurship organizes resources to produce goods and services. 
D) All of these are true. 
A) Resources are inputs used to produce goods and services. 
B) Labor is the mental and physical capacity of workers to produce goods and services. 
C) Entrepreneurship organizes resources to produce goods and services. 
D) All of these are true.

Question 8

The statement, "Violent crime has decreased in the last five years," is:

Accepted Answer

A) obviously wrong and, therefore, cannot be a positive statement. 
B) normative since it can be answered by simply looking at the facts. 
C) positive because it is testable. 
D) not very interesting because all normative issues are of little importance. 
A) obviously wrong and, therefore, cannot be a positive statement. 
B) normative since it can be answered by simply looking at the facts. 
C) positive because it is testable. 
D) not very interesting because all normative issues are of little importance.

Question 9

All of the following are examples of capital except :

Accepted Answer

A) the robot used to help produce your car. 
B) a computer used by your professor to write this exam. 
C) the factory that produces the costume jewelry you buy. 
D) the inventory of unsold goods at your local hardware store. 
E) an uncut diamond that you discover in your backyard. 
A) the robot used to help produce your car. 
B) a computer used by your professor to write this exam. 
C) the factory that produces the costume jewelry you buy. 
D) the inventory of unsold goods at your local hardware store. 
E) an uncut diamond that you discover in your backyard.

Question 10

The finite nature of the economy's resource base:

Accepted Answer

A) will be solved if only we would learn to conserve. 
B) is only a problem in developing countries. 
C) will be solved as technology advances. 
D) will always be with us. 
A) will be solved if only we would learn to conserve. 
B) is only a problem in developing countries. 
C) will be solved as technology advances. 
D) will always be with us.

Question 11

Abstracting from reality is an important element of all economic models.

Accepted Answer

A) True 
 B)False

Question 12

The term Ceteris paribus means that:

Accepted Answer

A) the model includes all important variables occurring in the real world. 
B) all factors which influence the event are changing at the same time. 
C) one influence is changing and everything else is being held constant. 
D) the consumer is king. 
A) the model includes all important variables occurring in the real world. 
B) all factors which influence the event are changing at the same time. 
C) one influence is changing and everything else is being held constant. 
D) the consumer is king.

Question 13

Economic models are of limited use since they cannot be tested empirically with actual data.

Accepted Answer

A) True 
 B)False

Question 14

Microeconomics deals with the analysis of all the following questions except how:

Accepted Answer

A) the wages of carpenters are determined. 
B) high did unemployment rise during the Great Depression. 
C) does Ford decide how to price its cars. 
D) does a college student decide how to spend her income. 
E) do monopolies and competitive markets differ. 
A) the wages of carpenters are determined. 
B) high did unemployment rise during the Great Depression. 
C) does Ford decide how to price its cars. 
D) does a college student decide how to spend her income. 
E) do monopolies and competitive markets differ.

Question 15

Which one of the following is the most accurate definition of economics?

Accepted Answer

A) Economics is the study of stocks and bonds. 
B) Economics is the study of how people allocate unlimited resources. 
C) Economics is the study of how consumers choose to spend their income. 
D) Economics is the study of how society chooses to allocate scarce resources. 
A) Economics is the study of stocks and bonds. 
B) Economics is the study of how people allocate unlimited resources. 
C) Economics is the study of how consumers choose to spend their income. 
D) Economics is the study of how society chooses to allocate scarce resources.

Question 16

Economics, according to its definition, studies how people:

Accepted Answer

A) earn and spend money. 
B) invest in the stock and bond markets. 
C) make choices in the face of scarcity. 
D) supply goods in response to demand. 
A) earn and spend money. 
B) invest in the stock and bond markets. 
C) make choices in the face of scarcity. 
D) supply goods in response to demand.

Question 17

Policies to create jobs in the nation are the concern of:

Accepted Answer

A) macroeconomics. 
B) microeconomics. 
C) both microeconomics and macroeconomics. 
D) neither microeconomics nor macroeconomics. 
A) macroeconomics. 
B) microeconomics. 
C) both microeconomics and macroeconomics. 
D) neither microeconomics nor macroeconomics.

Question 18

The study of microeconomics and macroeconomics differ in that:

Accepted Answer

A) microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy. 
B) microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy. 
C) microeconomics studies the actions of households and macroeconomics studies the actions of business firms. 
D) microeconomics examines the whole economy while macroeconomics studies the individual units of the economy. 
A) microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy. 
B) microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy. 
C) microeconomics studies the actions of households and macroeconomics studies the actions of business firms. 
D) microeconomics examines the whole economy while macroeconomics studies the individual units of the economy.

Question 19

A normative economic statement:

Accepted Answer

A) is a model used to collect data. 
B) is a statement of fact. 
C) is a statement of what ought to be, not what is. 
D) indicates what will occur if certain assumptions are true. 
A) is a model used to collect data. 
B) is a statement of fact. 
C) is a statement of what ought to be, not what is. 
D) indicates what will occur if certain assumptions are true.

Question 20

Policies to determine the price of troll dolls are a concern of macroeconomics.

Accepted Answer

A) True 
 B)False

Exam 1: Introducing the Economic Way of Thinking

Economics is the study of people making choices faced with the problem of unlimited wants and limited resources.

Which of the following is the best definition of economics?

Which of the following would eliminate scarcity as an economic problem?

Which of the following is a macroeconomic subject?

Determining the price of compact discs is a concern of:

Which of the following is true of resources?

The statement, "Violent crime has decreased in the last five years," is:

All of the following are examples of capital except :

The finite nature of the economy's resource base:

Abstracting from reality is an important element of all economic models.

The term Ceteris paribus means that:

Economic models are of limited use since they cannot be tested empirically with actual data.

Microeconomics deals with the analysis of all the following questions except how:

Which one of the following is the most accurate definition of economics?

Economics, according to its definition, studies how people:

Policies to create jobs in the nation are the concern of:

The study of microeconomics and macroeconomics differ in that:

A normative economic statement:

Policies to determine the price of troll dolls are a concern of macroeconomics.

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

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