Question 1

Select the normative  statement that completes the sentence: If wages rise more rapidly than productivity:

Accepted Answer

A)  profits will fall. 
B)  workers will earn 3/4 of GDP. 
C)  the rate of inflation increases. 
D)  policymakers should impose a wage ceiling. 
A)  profits will fall. 
B)  workers will earn 3/4 of GDP. 
C)  the rate of inflation increases. 
D)  policymakers should impose a wage ceiling. D

Question 2

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. C

Question 3

100 shares of stock in General Motors is considered which type of resource?

Accepted Answer

A)  land 
B)  labor 
C)  capital 
D)  It is not a resource. 
A)  land 
B)  labor 
C)  capital 
D)  It is not a resource. D

Question 4

If the amount of lemonade purchased and the outdoor temperature are directly related, then

Accepted Answer

A)  when temperature rises, the amount of lemonade purchased rises. 
B)  a graph with this relationship would be negatively sloped. 
C)  sellers of lemonade hope for cooler temperatures. 
D)  the slope of the line reflecting this relationship will be 0. 
A)  when temperature rises, the amount of lemonade purchased rises. 
B)  a graph with this relationship would be negatively sloped. 
C)  sellers of lemonade hope for cooler temperatures. 
D)  the slope of the line reflecting this relationship will be 0.

Question 5

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:

Accepted Answer

A)  confused association and causation. 
B)  misunderstood the Ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model. 
A)  confused association and causation. 
B)  misunderstood the Ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model.

Question 6

Scarcity is a problem:

Accepted Answer

A)  measured by the amount of goods available. 
B)  of the poor, but not the rich. 
C)  because human wants are unlimited while resources are limited. 
D)  only in industrialized economies. 
A)  measured by the amount of goods available. 
B)  of the poor, but not the rich. 
C)  because human wants are unlimited while resources are limited. 
D)  only in industrialized economies.

Question 7

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

Question 8

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

Accepted Answer

A)  why do national economies grow. 
B)  how does Microsoft price its software packages. 
C)  how does a central bank influence inflation. 
D)  why does a country experience recessions. 
A)  why do national economies grow. 
B)  how does Microsoft price its software packages. 
C)  how does a central bank influence inflation. 
D)  why does a country experience recessions.

Question 9

To be valid, an economic model must:

Accepted Answer

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

Question 10

Exhibit 1A-1 Straight line   
In Exhibit 1A-1, as X increases along the horizontal axis, from point A to point B on the line, the Y values

Accepted Answer

A)  increase so the relationship between X and Y is direct. 
B)  decrease so the relationship between X and Y is inverse. 
C)  remain unchanged so the relationship between X and Y is independent. 
D)  change so the relationship between X and Y is variable. 
A)  increase so the relationship between X and Y is direct. 
B)  decrease so the relationship between X and Y is inverse. 
C)  remain unchanged so the relationship between X and Y is independent. 
D)  change so the relationship between X and Y is variable.

Question 11

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

Accepted Answer

A)  Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion. 
B)  Gather data on crude oil prices and seemingly unrelated variables to look for associations, then formulate a hypothesis based on those unexpected associations. 
C)  Ask people in Alaska why they are not purchasing oil. 
D)  None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories. 
A)  Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion. 
B)  Gather data on crude oil prices and seemingly unrelated variables to look for associations, then formulate a hypothesis based on those unexpected associations. 
C)  Ask people in Alaska why they are not purchasing oil. 
D)  None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Question 12

Which of the following statements is an example of confusing association and causation?

Accepted Answer

A)  Senator Jones believes that more tax revenue should be distributed to the poor. 
B)  A map includes roads, but not every restaurant, telephone pole, and 
C)  Interest rates rise when it rains, all other factors constant. 
D)  When the price of Coca-Cola increases, consumers buy more Pepsi, all other factors constant. 
A)  Senator Jones believes that more tax revenue should be distributed to the poor. 
B)  A map includes roads, but not every restaurant, telephone pole, and 
C)  Interest rates rise when it rains, all other factors constant. 
D)  When the price of Coca-Cola increases, consumers buy more Pepsi, all other factors constant.

Question 13

A direct relationship is expressed graphically as a:

Accepted Answer

A)  positively sloped line or curve. 
B)  negatively sloped line or curve. 
C)  horizontal line. 
D)  vertical line. 
A)  positively sloped line or curve. 
B)  negatively sloped line or curve. 
C)  horizontal line. 
D)  vertical line.

Question 14

Microeconomics approaches the study of economics from the viewpoint of:

Accepted Answer

A)  inflation, unemployment, and economic growth. 
B)  the federal government. 
C)  individual economic units, such as consumers, firms, industries, and units of government. 
D)  the economy as a whole. 
A)  inflation, unemployment, and economic growth. 
B)  the federal government. 
C)  individual economic units, such as consumers, firms, industries, and units of government. 
D)  the economy as a whole.

Question 15

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 16

Complete the following analogy: A criminal is to a police artist's sketch as the economy is to:

Accepted Answer

A)  money. 
B)  an economic model. 
C)  a resource. 
D)  scarcity. 
A)  money. 
B)  an economic model. 
C)  a resource. 
D)  scarcity.

Question 17

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 18

Exhibit 1A-7 Straight line relationship  
Using the relationship shown in Exhibit 1A-7, suppose the price of air travel increases. How would you revise the graph to show this change?

Accepted Answer

A)  Draw a new point on the graph upward and to the left. 
B)  Draw a new point on the graph downward and to the right. 
C)  Draw a new line on the graph. 
D)  Change the current line so that its slope is flatter. 
A)  Draw a new point on the graph upward and to the left. 
B)  Draw a new point on the graph downward and to the right. 
C)  Draw a new line on the graph. 
D)  Change the current line so that its slope is flatter.

Question 19

Which of the following is used to illustrate an independent relationship between two variables?

Accepted Answer

A)  An upward-sloping curve 
B)  A downward-sloping curve 
C)  A hill-shaped curve 
D)  A horizontal or vertical line 
A)  An upward-sloping curve 
B)  A downward-sloping curve 
C)  A hill-shaped curve 
D)  A horizontal or vertical line

Question 20

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

Accepted Answer

A)  axis. 
B)  slope. 
C)  dependent curve. 
D)  independent curve. 
A)  axis. 
B)  slope. 
C)  dependent curve. 
D)  independent curve.

Exam 1: Introducing the Economic Way of Thinking

Select the normative statement that completes the sentence: If wages rise more rapidly than productivity:

Which of the following is a normative statement?

100 shares of stock in General Motors is considered which type of resource?

If the amount of lemonade purchased and the outdoor temperature are directly related, then

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:

Scarcity is a problem:

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

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

To be valid, an economic model must:

Exhibit 1A-1 Straight line In Exhibit 1A-1, as X increases along the horizontal axis, from point A to point B on the line, the Y values

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

Which of the following statements is an example of confusing association and causation?

A direct relationship is expressed graphically as a:

Microeconomics approaches the study of economics from the viewpoint of:

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

Complete the following analogy: A criminal is to a police artist's sketch as the economy is to:

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

Exhibit 1A-7 Straight line relationship Using the relationship shown in Exhibit 1A-7, suppose the price of air travel increases. How would you revise the graph to show this change?

Which of the following is used to illustrate an independent relationship between two variables?

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

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

Monetary Policy

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

Normative economics deals with and positive economics deals with .