Exam 2: Observing and Explaining the Economy

Suppose an economic study shows that increasing the tax rate on beer will reduce the amount of traffic accidents.Which of the following statements can be valid based on the study because they are positive statements,and which cannot be valid because they are normative statements. (A)"Increasing the tax rate on beer is a method of reducing traffic accidents." (B)"If the government wishes to reduce traffic accidents,it ought to raise the beer tax." (C)"The government should not raise the beer tax on low-income drinkers."

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."

Whether to have more or less government involvement in the overall economy is essentially a

Economists are likely to evaluate the impacts of rising gasoline prices through the use of

For policy decisions to be useful,

Explain why there is the popular impression that economists seldom agree with each other.

The ceteris paribus assumption is always used whenever an economist analyzes the relationship of two variables.

Which of the following is more of a microeconomic concept than a macroeconomic concept?

A good explanation for why people believe economists always disagree is that

Studying economics will provide you with tools that are

Explain why it is more difficult to determine causality in economics than in other sciences such as physics,chemistry,and biology.

Positive economics is the

Which of the following statements is true?

If the quantity demanded of coffee increases when the price of coffee declines,then these two ____ are ____.

Controlled experiments are

Explain why economics requires historical and philosophical skills in addition to analytical skills.

Two variables are negatively correlated if

If two variables are correlated,then it must be true that one of the variables causes the other.

An economic model is the same as a theory.

Interpret the following data on the relative price of cellphones and answer the following questions. (A)Calculate the relative price of cellphones for each year. (B)Plot the relative price of cellphones. (C)What can you say about how the price of cellphones varied in comparison to the price of all goods between 2005 and 2008?