Question 1

Those who support a laissez faire system

Accepted Answer

A) argue for a French-style economy. 
B) argue for a market economy. 
C) support government intervention. 
D) argue for a command economy. 
E) argue for a mixed economy. 
A) argue for a French-style economy. 
B) argue for a market economy. 
C) support government intervention. 
D) argue for a command economy. 
E) argue for a mixed economy.

Question 2

Economic models

Accepted Answer

A) are not complicated because the behavior they describe is not complicated. 
B) require either algebra or graphs. 
C) are complicated because human behavior is complicated. 
D) are simplifications of the phenomena they attempt to explain. 
E) need to be the same as the phenomena they describe. 
A) are not complicated because the behavior they describe is not complicated. 
B) require either algebra or graphs. 
C) are complicated because human behavior is complicated. 
D) are simplifications of the phenomena they attempt to explain. 
E) need to be the same as the phenomena they describe.

Question 3

A major reason for the development of new models is

Accepted Answer

A) because of asymmetric information. 
B) that new observations cannot be explained by existing models. 
C) that old economic laws are often repealed. 
D) that human behavior is no longer important. 
E) that new models are always easier to understand. 
A) because of asymmetric information. 
B) that new observations cannot be explained by existing models. 
C) that old economic laws are often repealed. 
D) that human behavior is no longer important. 
E) that new models are always easier to understand.

Question 4

A newspaper editorial explaining what should be done to reduce the budget deficit is an example of

Accepted Answer

A) everything else held constant. 
B) microeconomics. 
C) functional economics. 
D) positive economics. 
E) normative economics. 
A) everything else held constant. 
B) microeconomics. 
C) functional economics. 
D) positive economics. 
E) normative economics.

Question 5

Exhibit 2-3  
-In Exhibit 2-3,an example of a variable would be the

Accepted Answer

A) price of coffee. 
B) intercept. 
C) relationship that shows by how many units the supply of coffee will change for any unit change in the price of coffee. 
D) slope of the line. 
E) price at which the supply of coffee is zero. 
A) price of coffee. 
B) intercept. 
C) relationship that shows by how many units the supply of coffee will change for any unit change in the price of coffee. 
D) slope of the line. 
E) price at which the supply of coffee is zero.

Question 6

Most disagreements between economists occur because of different data sources.

Accepted Answer

A) True 
 B)False

Question 7

A hypothesis is

Accepted Answer

A) an alternative to using models. 
B) a testable statement used to explain observations. 
C) an untestable explanation used to explain observations. 
D) a fact. 
E) the same as a theory. 
A) an alternative to using models. 
B) a testable statement used to explain observations. 
C) an untestable explanation used to explain observations. 
D) a fact. 
E) the same as a theory.

Question 8

An economic variable is any economic measure that

Accepted Answer

A) has different values because of researchers' different perspectives. 
B) has no market value. 
C) has a fixed value over time. 
D) has no effect on the economy. 
E) can vary over a range of values. 
A) has different values because of researchers' different perspectives. 
B) has no market value. 
C) has a fixed value over time. 
D) has no effect on the economy. 
E) can vary over a range of values.

Question 9

All of the following are what economists commonly do except

Accepted Answer

A) describing economic events. 
B) explaining why economic events occur. 
C) making predictions for some economic events. 
D) eliminating scarcity in resources. 
E) making recommendations for economic policy. 
A) describing economic events. 
B) explaining why economic events occur. 
C) making predictions for some economic events. 
D) eliminating scarcity in resources. 
E) making recommendations for economic policy.

Question 10

Explaining why the total amount of miles traveled in vehicles have risen in recent years is one example of what economists do.

Accepted Answer

A) True 
 B)False

Question 11

In describing the relationship between X and Y,the ceteris paribus assumption implies that

Accepted Answer

A) the value of X does not change. 
B) the value of Y does not change. 
C) the values of both X and Y do not change. 
D) all other factors that may affect X and Y are constant. 
E) nothing in the world can change. 
A) the value of X does not change. 
B) the value of Y does not change. 
C) the values of both X and Y do not change. 
D) all other factors that may affect X and Y are constant. 
E) nothing in the world can change.

Question 12

Consider an economic model of CD production.Represent this model graphically,algebraically,and verbally.

Accepted Answer

Graphically: @#IMG-DLM& Algebraically:
Using the i

Question 13

A microeconomic model must be much smaller in size than a macroeconomic model.

Accepted Answer

A) True 
 B)False

Question 14

Knowledge of economics will help you make better decisions about education,employment,and investments.

Accepted Answer

A) True 
 B)False

Question 15

Experimental economics

Accepted Answer

A) is the dominant method in economics. 
B) does not exist. 
C) uses laboratory experiments to analyze economic behavior. 
D) is the method used when comparing the economic experience of other countries. 
E) is the method used by the government to collect economic data. 
A) is the dominant method in economics. 
B) does not exist. 
C) uses laboratory experiments to analyze economic behavior. 
D) is the method used when comparing the economic experience of other countries. 
E) is the method used by the government to collect economic data.

Question 16

The table shows the price of motor fuel (mainly gasoline)and the overall price level (the consumer price index)in five-year intervals over the period 1970 through 1990.   (A)Plot a diagram of the relative price of motor fuel for the 1970-1990 period.
(B)Explain what has been happening to the relative price of motor fuel over this period.

Accepted Answer

(A)The plot of the diagram is shown in t

Question 17

Exhibit 2-1  
-Exhibit 2-1 shows movements of two variables,X and Y,from 1980 through 1991.From this diagram the most one can conclude is that

Accepted Answer

A) X and Y are positively correlated with each other. 
B) X and Y are negatively correlated with each other. 
C) X and Y are positively correlated with each other and either X causes Y or Y causes X. 
D) we cannot say anything about how X and Y are related because we do not know the units of measurement for X and Y. 
E) X and Y are not correlated with each other. 
A) X and Y are positively correlated with each other. 
B) X and Y are negatively correlated with each other. 
C) X and Y are positively correlated with each other and either X causes Y or Y causes X. 
D) we cannot say anything about how X and Y are related because we do not know the units of measurement for X and Y. 
E) X and Y are not correlated with each other.

Question 18

What is the difference between correlation and causality?

Accepted Answer

Correlation means that one eve

Question 19

Economic models differ from those in the physical sciences because

Accepted Answer

A) they are usually more difficult than models in the physical sciences. 
B) economics has nothing to do with anything physical. 
C) they are less difficult than those in the physical sciences. 
D) they attempt to explain human behavior. 
E) economics relies on controlled experiments. 
A) they are usually more difficult than models in the physical sciences. 
B) economics has nothing to do with anything physical. 
C) they are less difficult than those in the physical sciences. 
D) they attempt to explain human behavior. 
E) economics relies on controlled experiments.

Question 20

Exhibit 2-3  
-Exhibit 2-3 shows two variables that are

Accepted Answer

A) constant. 
B) positively related. 
C) negatively related. 
D) not related. 
E) both positively and negatively related. 
A) constant. 
B) positively related. 
C) negatively related. 
D) not related. 
E) both positively and negatively related.

Exam 2: Observing and Explaining the Economy

Those who support a laissez faire system

Economic models

A major reason for the development of new models is

A newspaper editorial explaining what should be done to reduce the budget deficit is an example of

Exhibit 2-3 -In Exhibit 2-3,an example of a variable would be the

Most disagreements between economists occur because of different data sources.

A hypothesis is

An economic variable is any economic measure that

All of the following are what economists commonly do except

Explaining why the total amount of miles traveled in vehicles have risen in recent years is one example of what economists do.

In describing the relationship between X and Y,the ceteris paribus assumption implies that

Consider an economic model of CD production.Represent this model graphically,algebraically,and verbally.

A microeconomic model must be much smaller in size than a macroeconomic model.

Knowledge of economics will help you make better decisions about education,employment,and investments.

Experimental economics

Exhibit 2-1 -Exhibit 2-1 shows movements of two variables,X and Y,from 1980 through 1991.From this diagram the most one can conclude is that

What is the difference between correlation and causality?

Economic models differ from those in the physical sciences because

Exhibit 2-3 -Exhibit 2-3 shows two variables that are

The Central Idea

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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