Question 1

Macroeconomics studies economywide issues like inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 2

A horizontal line has an infinite slope.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 1A-1  Straight line   In Exhibit 1A-1, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values increase. The relationship between the X and Y variables is:

Accepted Answer

A)  direct. 
B)  inverse. 
C)  independent. 
D)  variable. 
A)  direct. 
B)  inverse. 
C)  independent. 
D)  variable.

Question 4

The statement, "John buys more of good X as his income increases, Ceteris paribus ," means:

Accepted Answer

A)  John's income is being held constant. 
B)  John's purchases of good X are being held constant. 
C)  John's income and purchases of this good are being held constant. 
D)  the price of this good is being allowed to change. 
A)  John's income is being held constant. 
B)  John's purchases of good X are being held constant. 
C)  John's income and purchases of this good are being held constant. 
D)  the price of this good is being allowed to change.

Question 5

A theory is:

Accepted Answer

A)  based only on critical factors or variables. 
B)  a simplified abstraction of the real world. 
C)  a detailed description of reality. 
D)  a and b. 
A)  based only on critical factors or variables. 
B)  a simplified abstraction of the real world. 
C)  a detailed description of reality. 
D)  a and b.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 1A-4  Straight line   Straight line A-D in Exhibit 1A-4 shows that:

Accepted Answer

A)  increasing value for X will increase the value of Y. 
B)  increasing value for X will decrease the value of Y. 
C)  increasing values for X do not affect the value of Y. 
D)  all of the above. 
A)  increasing value for X will increase the value of Y. 
B)  increasing value for X will decrease the value of Y. 
C)  increasing values for X do not affect the value of Y. 
D)  all of the above.

Question 8

Scarcity has no importance to understanding economics.

Accepted Answer

A) True 
 B)False

Question 9

When economists want to hold a number of factors constant, they are demonstrating which of the following expressions?

Accepted Answer

A)  Positive economics model. 
B)  Consumer sovereignty. 
C)  Ceteris paribus . 
D)  Normative economics. 
A)  Positive economics model. 
B)  Consumer sovereignty. 
C)  Ceteris paribus . 
D)  Normative economics.

Question 10

An analysis of IBM's pricing decisions would be classified as a macroeconomic study.

Accepted Answer

A) True 
 B)False

Question 11

All human wants cannot be satisfied because of the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 12

The condition of scarcity:

Accepted Answer

A)  cannot be eliminated. 
B)  prevails in poor economies. 
C)  prevails in rich economies. 
D)  All of the above. 
A)  cannot be eliminated. 
B)  prevails in poor economies. 
C)  prevails in rich economies. 
D)  All of the above.

Question 13

The term Ceteris paribus means that:

Accepted Answer

A)  everything is changing. 
B)  all other things remain unchanged. 
C)  no one knows which variables will change and which will remain constant. 
D)  the basic principle of economics do not apply to the case being considered. 
A)  everything is changing. 
B)  all other things remain unchanged. 
C)  no one knows which variables will change and which will remain constant. 
D)  the basic principle of economics do not apply to the case being considered.

Question 14

A conditional statement such as if event A occurs, then event B follows is an example of normative economics.

Accepted Answer

A) True 
 B)False

Question 15

When economists use the term Ceteris paribus , they are indicating that:

Accepted Answer

A)  the relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other variables except the ones specified are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis. 
A)  the relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other variables except the ones specified are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis.

Question 16

Normative economics deals with ____ and positive economics deals with ____.

Accepted Answer

A)  what should be; what is 
B)  fiction; fact 
C)  microeconomics; macroeconomics 
D)  negative aspects; positive aspects 
E)  changing circumstances; same circumstances 
A)  what should be; what is 
B)  fiction; fact 
C)  microeconomics; macroeconomics 
D)  negative aspects; positive aspects 
E)  changing circumstances; same circumstances

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Scarcity can be eliminated if:

Accepted Answer

A)  people satisfy needs rather than wants. 
B)  sufficient new resources were discovered. 
C)  output of goods and services were increased. 
D)  none of the above. 
A)  people satisfy needs rather than wants. 
B)  sufficient new resources were discovered. 
C)  output of goods and services were increased. 
D)  none of the above.

Question 19

Policies to increase the supply of money in the economy are primarily a concern of microeconomics.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is a normative statement?

Accepted Answer

A)  A decrease in price leads to an increase in quantity consumed. 
B)  Incomes grow more rapidly in high-tax states than low-tax states. 
C)  People would be better off if government expenditures were higher. 
D)  People will buy less butter at $1.50 per pound than they will at $1 per pound. 
A)  A decrease in price leads to an increase in quantity consumed. 
B)  Incomes grow more rapidly in high-tax states than low-tax states. 
C)  People would be better off if government expenditures were higher. 
D)  People will buy less butter at $1.50 per pound than they will at $1 per pound.

Exam 1: Introducing the Economic Way of Thinking

Macroeconomics studies economywide issues like inflation and unemployment.

A horizontal line has an infinite slope.

Exhibit 1A-1 Straight line In Exhibit 1A-1, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values increase. The relationship between the X and Y variables is:

The statement, "John buys more of good X as his income increases, Ceteris paribus ," means:

A theory is:

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

Exhibit 1A-4 Straight line Straight line A-D in Exhibit 1A-4 shows that:

Scarcity has no importance to understanding economics.

When economists want to hold a number of factors constant, they are demonstrating which of the following expressions?

An analysis of IBM's pricing decisions would be classified as a macroeconomic study.

All human wants cannot be satisfied because of the problem of scarcity.

The condition of scarcity:

The term Ceteris paribus means that:

A conditional statement such as if event A occurs, then event B follows is an example of normative economics.

When economists use the term Ceteris paribus , they are indicating that:

Normative economics deals with ____ and positive economics deals with ____.

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

Scarcity can be eliminated if:

Policies to increase the supply of money in the economy are primarily a concern of microeconomics.

Which of the following is a normative statement?

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Normative economics deals with and positive economics deals with .