Question 1

To be valid, an economic model must:

Accepted Answer

A)  include every activity which occurs in the real world. 
B)  include at least 85 percent of the activity which occurs in the real world. 
C)  be able to predict events occurring in the real world. 
D)  exclude any link to the real world. 
E)  not be based on an abstraction of the real world. 
A)  include every activity which occurs in the real world. 
B)  include at least 85 percent of the activity which occurs in the real world. 
C)  be able to predict events occurring in the real world. 
D)  exclude any link to the real world. 
E)  not be based on an abstraction of the real world.

Question 2

The basic purpose of economic models is to:

Accepted Answer

A)  construct simplifying assumptions about the real world. 
B)  explain reality in all its complexity. 
C)  construct situations where controlled experiments can be carried out. 
D)  provide explanations for, and predictions of the relationship between variables. 
A)  construct simplifying assumptions about the real world. 
B)  explain reality in all its complexity. 
C)  construct situations where controlled experiments can be carried out. 
D)  provide explanations for, and predictions of the relationship between variables.

Question 3

The creative ability of persons to combine and direct resources to produce new products is known as:

Accepted Answer

A)  economizing. 
B)  entrepreneurship. 
C)  value judgment. 
D)  product sensitivity. 
A)  economizing. 
B)  entrepreneurship. 
C)  value judgment. 
D)  product sensitivity.

Question 4

An economic model is:

Accepted Answer

A)  a plastic scaled version of the economy. 
B)  a complete depiction of reality. 
C)  an abstraction from reality. 
D)  applicable to consumer behavior but not to producer behavior. 
E)  not an accepted tool of the economics profession. 
A)  a plastic scaled version of the economy. 
B)  a complete depiction of reality. 
C)  an abstraction from reality. 
D)  applicable to consumer behavior but not to producer behavior. 
E)  not an accepted tool of the economics profession.

Question 5

The graph of a direct relationship will have a positive slope.

Accepted Answer

A) True 
 B)False

Question 6

Computer programs or software are an example of:

Accepted Answer

A)  land. 
B)  labor. 
C)  capital. 
D)  none of the above. 
A)  land. 
B)  labor. 
C)  capital. 
D)  none of the above.

Question 7

Your scarcity problem would disappear if you were rich.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 1A-7  Straight line relationship   According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:

Accepted Answer

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

Question 9

An upward-sloping line or curve is used to illustrate:

Accepted Answer

A)  a direct relationship. 
B)  an inverse relationship. 
C)  two unrelated variables. 
D)  the ceteris paribus assumption. 
A)  a direct relationship. 
B)  an inverse relationship. 
C)  two unrelated variables. 
D)  the ceteris paribus assumption.

Question 10

Exhibit 1A-3  Straight line   Straight line AB in Exhibit 1A-3 shows that:

Accepted Answer

A)  increasing values for X reduces the value of Y. 
B)  decreasing values for X increases the value of Y. 
C)  there is an inverse relationship between X and Y. 
D)  all of the above. 
A)  increasing values for X reduces the value of Y. 
B)  decreasing values for X increases the value of Y. 
C)  there is an inverse relationship between X and Y. 
D)  all of the above.

Question 11

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 12

In a graphic relationship, shifts in a curve are caused by a change in:

Accepted Answer

A)  the slope of the curve. 
B)  a factor not measured on the axes of the graph. 
C)  one of the factors measured on either axes of the graph. 
D)  any factor, whether measured on the axes of the graph of not. 
A)  the slope of the curve. 
B)  a factor not measured on the axes of the graph. 
C)  one of the factors measured on either axes of the graph. 
D)  any factor, whether measured on the axes of the graph of not.

Question 13

Which of the following pairs is the most likely to exhibit a direct relationship?

Accepted Answer

A)  The price of gasoline and the amount of gasoline that people purchase. 
B)  Cholesterol levels and the likelihood of developing heart disease. 
C)  Outdoor temperature and heating oil sales. 
D)  Annual income and weekly pawn shop visits. 
A)  The price of gasoline and the amount of gasoline that people purchase. 
B)  Cholesterol levels and the likelihood of developing heart disease. 
C)  Outdoor temperature and heating oil sales. 
D)  Annual income and weekly pawn shop visits.

Question 14

The sun is an example of:

Accepted Answer

A)  a natural resource. 
B)  capital. 
C)  labor. 
D)  none of the above. 
A)  a natural resource. 
B)  capital. 
C)  labor. 
D)  none of the above.

Question 15

Macroeconomics deals with the analysis of all of the following questions except:

Accepted Answer

A)  why do national economies grow. 
B)  what determines a nation's savings and investments. 
C)  how does a central bank influence inflation. 
D)  why does a country experience recessions. 
E)  how does Microsoft price its software packages. 
A)  why do national economies grow. 
B)  what determines a nation's savings and investments. 
C)  how does a central bank influence inflation. 
D)  why does a country experience recessions. 
E)  how does Microsoft price its software packages.

Question 16

Which of the following is the best example of a microeconomic topic?

Accepted Answer

A)  The impact that the money supply has on inflation. 
B)  The reasons for increases in the price of soft drinks. 
C)  The effect that federal budget deficits have on the interest rate. 
D)  The tradeoff between inflation and unemployment. 
A)  The impact that the money supply has on inflation. 
B)  The reasons for increases in the price of soft drinks. 
C)  The effect that federal budget deficits have on the interest rate. 
D)  The tradeoff between inflation and unemployment.

Question 17

Economists use ____ economic analysis to understand an individual market. They then use ____ economic analysis to guide future national economic policy.

Accepted Answer

A)  b and d 
B)  macro; micro 
C)  positive; normative 
D)  normative; positive 
A)  b and d 
B)  macro; micro 
C)  positive; normative 
D)  normative; positive

Question 18

An economics textbook is an example of:

Accepted Answer

A)  capital. 
B)  labor. 
C)  a natural resource. 
D)  entrepreneurship. 
A)  capital. 
B)  labor. 
C)  a natural resource. 
D)  entrepreneurship.

Question 19

A positive economic statement is:

Accepted Answer

A)  an opinion of an action that should be taken. 
B)  an action that will have a positive effect on the economy. 
C)  a statement testable by facts. 
D)  a claim that the speaker is positive will occur. 
E)  always a microeconomic position. 
A)  an opinion of an action that should be taken. 
B)  an action that will have a positive effect on the economy. 
C)  a statement testable by facts. 
D)  a claim that the speaker is positive will occur. 
E)  always a microeconomic position.

Question 20

When economists say scarcity, they mean:

Accepted Answer

A)  there are only a limited number of consumers who would be interested in purchasing goods. 
B)  the human desire for goods exceeds the available supply of time, goods and resources. 
C)  most people in poorer countries do not have enough goods. 
D)  goods are so expensive that only the rich can afford it. 
A)  there are only a limited number of consumers who would be interested in purchasing goods. 
B)  the human desire for goods exceeds the available supply of time, goods and resources. 
C)  most people in poorer countries do not have enough goods. 
D)  goods are so expensive that only the rich can afford it.

Exam 1: Introducing the Economic Way of Thinking

To be valid, an economic model must:

The basic purpose of economic models is to:

The creative ability of persons to combine and direct resources to produce new products is known as:

An economic model is:

The graph of a direct relationship will have a positive slope.

Computer programs or software are an example of:

Your scarcity problem would disappear if you were rich.

Exhibit 1A-7 Straight line relationship According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:

An upward-sloping line or curve is used to illustrate:

Exhibit 1A-3 Straight line Straight line AB in Exhibit 1A-3 shows that:

All of the following are examples of capital except :

In a graphic relationship, shifts in a curve are caused by a change in:

Which of the following pairs is the most likely to exhibit a direct relationship?

The sun is an example of:

Macroeconomics deals with the analysis of all of the following questions except:

Which of the following is the best example of a microeconomic topic?

Economists use ____ economic analysis to understand an individual market. They then use ____ economic analysis to guide future national economic policy.

An economics textbook is an example of:

A positive economic statement is:

When economists say scarcity, they mean:

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

Economists use economic analysis to understand an individual market. They then use economic analysis to guide future national economic policy.