Deck 2: Economic Theories, Data, and Graphs

Question 1

An index number is used to

A) compare the same variable in two different situations.
B) compare two different variables in two different situations.
C) designate a specific value for further reference.
D) compare two different variables in the same situation.
E) measure the absolute value of a variable.

Answer 1

A

Question 2

Which of the following is a normative statement?

A) Tuition fees should be waived for low-income students.
B) A free-trade agreement between two countries will result in an increase in trade.
C) The higher is the level of taxes, the higher are wage demands.
D) A reduction in export taxes on petroleum would result in higher wages.
E) The higher is the level of taxes, the lower is consumption spending.

Answer 2

A

Question 3

Which of the following statements is NOT correct?

A) Exposing them to empirical evidence can best test positive statements.
B) Economic statements cannot be tested because human decisions involve free will.
C) Economists test their theories by confronting the predictions of their theories with the evidence drawn from the real world.
D) Economic predictions will be fulfilled when their underlying hypotheses conform to actual human behaviour.
E) Normative statements cannot be tested by the scientific method.

Answer 3

B

Question 4

A hypothesis (or a prediction) is a statement about

A) how assumptions affect theories.
B) what will happen in the future.
C) those things which we believe to be true, but cannot prove.
D) the relationship between facts explained by the hypothesis.
E) how two or more variables are related to each other.

Question 5

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years. TABLE 2-2
Refer to Table 2-2. Assume that 2005 is used as the base year, with the index number = 100.Which of the following series is the correct set of index numbers for the per-minute cell phonecharges from 2005 to 2009?

A) 1.0; 0.91; 0.73; 0.64; 0.45
B) 100; 91; 73; 64; 45
C) 0.55; 0.50; 0.40; 0.35; 0.25
D) 100%; 91%; 73%; 64% 45%
E) 55; 50; 40; 35; 25

Question 6

Economists build models that abstract from the complexities of reality because

A) economists do not understand the real world.
B) economists are not interested in reality.
C) it is easier to do so.
D) the complexities of reality are unimportant.
E) they believe they gain a greater understanding of reality.

Question 7

A positive statement is one that states

A) non-negative numbers.
B) what is desirable.
C) what is, was, or will be.
D) what is and what should be.
E) what should be but is not.

Question 8

The statement that a two-percent increase in the money supply leads to a two-percent increase inthe price level is an example of a(n)

A) variable.
B) prediction.
C) normative statement.
D) model.
E) assumption.

Question 9

An economic theory requires, among other things,

A) a set of value judgments to interpret the empirical evidence.
B) a controlled laboratory setting in which the theory can be tested.
C) that the set of predictions be correct.
D) a set of definitions of the variables to be considered.
E) the use of endogenous variables only.

Question 10

The table below shows hypothetical tuition costs at a Canadian university. TABLE 2-1
Refer to Table 2-1. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2007 is calculated as follows:

A) (5000/5100) × 100 = 98
B) (5100/5000) × 100 = 102
C) 5100/5000 = 1.02
D) 5100/5100 = 100
E) 5000/5100 = 0.98

Question 11

Choose the answer that best explains why economists build models that abstract from the complexities of reality.

A) Because the complexities of reality are unimportant.
B) Because economists are not interested in reality.
C) Because this allows economists to conduct controlled experiments to test their theories.
D) Because they believe they gain a greater understanding of reality.
E) Because economics deals only in the abstract.

Question 12

Suppose an individual wheat farmer's income is influenced by the region's average daily temperature. When examining the determinants of individual farmer income, the average daily temperature is a(n) variable.

A) flow
B) induced
C) dependent
D) endogenous
E) exogenous

Question 13

On a coordinate graph, what is the X intercept of the function

A) -60
B) 0
C) 60
D) -20
E) 20

Question 14

The table below shows hypothetical tuition costs at a Canadian university. TABLE 2-1
Refer to Table 2-1. The increase in tuition from 2005 to 2009 is:

A) 4 percent.
B) 100/5000.
C) 200.
D) 0.04 percent.
E) 200/5200.

Question 15

What is the best way to display the unemployment rate in each of the world's developed economies in 2009?

A) a scatter diagram with two variables
B) a cross-sectional graph with time-series data
C) a cross-sectional bar chart graph
D) a scatter diagram
E) a time series line graph

Question 16

A theory

A) can only be tested with a controlled experiment.
B) is designed to explain and predict what we observe.
C) is used to impose order on the world.
D) assumes definitions for variables.
E) enables one to make prophesies about the future.

Question 17

The slope of a straight line is necessarily

A) negative.
B) zero.
C) positive.
D) constant.
E) increasing as one moves up the line.

Question 18

An economic theory

A) will be useful only if all human behaviour is rational.
B) will be useful as long as it is logically consistent.
C) is only useful if its underlying assumptions are realistic.
D) will predict more accurately if it contains a greater number of mathematical equations.
E) must be judged on its ability to explain and predict real-world phenomena.

Question 19

Suppose there is a theory that several things influence the price of fish in Halifax, one of which isthe weather during the fishing season. When examining the determinants of the price of fish, theweather is

A) a stock, as it influences the quantity of fish caught.
B) an endogenous variable, as it influences the price of fish.
C) an endogenous variable, as it is determined within the theory.
D) an exogenous variable, as it is determined outside the theory.
E) an act of God and, therefore, has no legitimate connection with the theory.

Question 20

Economic theories

A) can be used to help explain and predict economic behaviour.
B) cannot be tested because we cannot do economic "experiments".
C) must apply to all economies to be true.
D) are not useful because of the unrealistic assumptions they contain.
E) cannot help to predict future behaviour.

Question 21

Consider the line which is the graph of the function Y = 60 - 4X. The slope of this line is

A) 60.
B) -2.5.
C) -40.
D) -4.0.
E) 4.

Question 22

The scientific approach to economic inquiry involves

A) testing the predictions with empirical data.
B) choosing data that will support the predictions.
C) using only independent variables.
D) testing the reality of the assumptions of the model.
E) using only endogenous variables in economic models.

Question 23

Suppose that a particular theory predicts that on Monday, Wednesday, and Friday the stock marketwill rise and that on Tuesday and Thursday the stock market will fall. If an economist tests thistheory and finds that over a six-month period the theory predicts accurately, the economist would likely say that the theory

A) has been proven correct.
B) is not rejected by the evidence.
C) is not useful because stock markets involve irrational human behaviour.
D) is reliable.
E) shouldn't be taken seriously.

Question 24

An unweighted index number

A) has different weights for each data series depending on importance.
B) has equal weights attached to different data series.
C) has no weights attached to different data series.
D) is not a real index number.
E) can only be used for price indexes.

Question 25

Suppose that a particular theory predicts that on sunny days consumption of ice cream will riseand that on cloudy days consumption of ice cream will fall. If an economist tests this theory andfinds that over a six-month period the theory predicts accurately, the economist would likely say

A) the evidence fails to reject the theory.
B) the theory has been proven correct.
C) the theory is always reliable.
D) that the theory is not useful because consumption involves irrational human behaviour.
E) the theory shouldn't be taken seriously.

Question 26

Which of the following best describes the relationship between positive and normative statements in economics?

A) Positive and normative statements are alternate ways of describing the desirability of certain economic policies.
B) Normative statements evaluate the desirability of certain economic changes; positive statements do not.
C) Economists generally agree with each other regardless of whether a question is positive or normative.
D) Neither positive nor normative statements are concerned with the desirability of certain economic changes.
E) Normative statements are those with which all economists agree; positive statements may give rise to some disagreement.

Question 27

An assertion about the desirability of reducing unemployment by lowering payroll taxes is most likely

A) a normative statement.
B) a hypothesis.
C) a testable proposition.
D) a theory.
E) a positive statement.

Question 28

The statement that introducing a policy of legislated rent controls will lead to a housing shortage is an example of a(n)

A) model.
B) normative statement.
C) theory.
D) prediction.
E) assumption.

Question 29

Each of the following is an example of a hypothesis EXCEPT:

A) If the price of a movie ticket increases, then John will attend fewer movies.
B) If the movie is starring Harrison Ford, then Charles and John will both attend.
C) Charles does not enjoy movies.
D) If Charles attends the movie, then John will not attend.
E) If the theatre catches on fire, then people will leave the theatre.

Question 30

The statement that a country's rate of GDP growth is influenced by individuals' saving behaviour is an example of a(n)

A) economic law.
B) theory.
C) prediction.
D) variable.
E) normative statement.

Question 31

When an increase in one variable is associated with a decrease in a second variable, the twovariables are

A) positively related.
B) inversely proportionally related.
C) equivalent.
D) proportionally related.
E) negatively related.

Question 32

A scientific prediction is

A) a conditional statement of the following form: if A occurs, then B will follow.
B) a prophesy of how the future will unfold.
C) a causal statement of the following form: A will occur because B occurred.
D) always based on the law of large numbers.
E) not testable.

Question 33

Which of the following is a normative statement?

A) Reducing unemployment is more important than reducing inflation.
B) Queen Elizabeth II is the wealthiest woman in the world.
C) The sun rises in the west and sets in the east.
D) A government deficit will reduce unemployment and cause an increase in prices.
E) An increase in the price of lumber is followed by a decrease in the construction of new houses.

Question 34

Suppose an economist tells you that the unemployment rate in Canada last year was 7.8 percent.This is an example of a(n) statement.

A) autonomous
B) positive
C) induced
D) imputed
E) normative

Question 35

An economist has data showing household income and energy consumption for 10 000 Canadianhouseholds. The best way to illustrate these data is

A) a logarithmic scale diagram.
B) a cross-sectional bar-chart graph.
C) a time-series bar chart diagram.
D) a time-series line graph.
E) a scatter diagram.

Question 36

When considering how a family's level of consumption changes in response to changes in itsincome,

A) consumption is the dependent variable and income is the independent variable.
B) both of the variables are independent.
C) income is the dependent variable and family consumption is the independent variable.
D) there is no relationship between the variables.
E) both of the variables are dependent.

Question 37

As a science, economics is disadvantaged in that

A) it is usually not possible to conduct controlled experiments in economics, in contrast with certain other sciences.
B) some economic variables are determined within the theory.
C) economic hypotheses cannot be accepted with complete certainty, by contrast with the other sciences.
D) it deals with human behaviour and thus is not open to empirical testing.
E) economic variables do not change enough to provide reliable data for testing hypotheses.

Question 38

Most economists believe that economics be made completely value-free, in part because it is to absolutely refute a theory on the basis of factual evidence.

A) can; possible
B) can; impossible
C) cannot; impossible
D) will; necessary
E) cannot; possible

Question 39

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years. TABLE 2-2
Refer to Table 2-2. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2008 is calculated as follows:

A) (0.55/0.35) × 100 = 157.14
B) (0.35/0.55) × 100 = 63.64
C) 0.35/0.55 = 0.64
D) 0.35 × 100 = 35
E) 0.55/0.35 = 1.57

Question 40

If the graph of a function is a horizontal line, the slope of this line is

A) infinity.
B) undefined.
C) -1.
D) 0.
E) 1.

Question 41

When comparing the magnitude of changes in variables with different scales it is best to

A) express each variable as an index number.
B) use only time-series data.
C) express each variable as a logarithmic number.
D) compare the absolute data on each variable.
E) compare the relative data on each variable.

Question 42

Suppose point A represents coordinates (X = 5, Y = 6) and point B represents coordinates (X = 2, Y= 3). Then the slope of the straight line joining points A and B is

A) -1.
B) 2/3.
C) 5/6.
D) 1.
E) 3/2.

Question 43

Data collected repeatedly over successive periods of time are called

A) logarithmic data.
B) time-analysis data.
C) topographic data.
D) cross-sectional data.
E) time-series data.

Question 44

In a co-ordinate graph, with Y on the vertical axis and X on the horizontal axis, the variable X ispositive and the variable Y is negative in the quadrant.

A) bottom, left
B) top, right
C) bottom, right
D) top, left

Question 45

Data collected of several variables but for the same time period are called

A) time-series data.
B) logarithmic data.
C) topographic data.
D) cross-sectional data.
E) time-analysis data.

Question 46

The use of statistics in economics is

A) to test predictions and to estimate the values of variables in economic theories.
B) to study how the economic system should perform basic economic functions.
C) to model nature.
D) for descriptive purposes only.
E) entirely devoid of ethical judgments.

Question 47

When it is said that variable A depends on variable B, then A is

A) a function of B.
B) independent of B.
C) proportional to B.
D) a derivative of B.
E) partially exclusive of B.

Question 48

The table below shows hypothetical tuition costs at a Canadian university. TABLE 2-1
Refer to Table 2-1. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2009 is

A) 96
B) 1.04
C) 0.96
D) 100
E) 104

Question 49

When an increase in one variable is associated with an increase in a second variable, the two variables are

A) inversely proportionally related.
B) equivalent.
C) proportionally related.
D) positively related.
E) negatively related.

Question 50

If a theory's prediction is tested and rejected,

A) it is rejected with certainty, because it is not possible to reject a hypothesis that is actually true.
B) a new hypothesis is usually suggested and tested.
C) the statistical tolerance of risk for accepting a false hypothesis should be increased.
D) inquiry into the matter should cease.
E) the original data and assumptions should be discarded.

Question 51

Which of the following is a positive statement?

A) The higher the price for gasoline, the less of it will be consumed.
B) Corporations in Canada should pay more taxes.
C) Canada should reduce its imports of consumer goods.
D) Substitutes for fossil fuels should be developed.
E) There should be one price for gasoline throughout Canada.

Question 52

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years. TABLE 2-2
Refer to Table 2-2. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2007 is

A) 1.375
B) 137.5
C) 0.72
D) 72.73
E) 100

Question 53

The statement "Y is a function of X" means that the

A) values of Y and X are independent.
B) values of Y and X are the same.
C) values of Y and X are related to some third variable.
D) value of Y depends on that of X.
E) value of X depends on that of Y.

Question 54

Disagreements over positive statements

A) are basically devoid of any emotion.
B) arise from the failure to distinguish between a positive and a normative statement.
C) cannot arise because positive statements are facts.
D) never occur.
E) are best handled by an appeal to the facts.

Question 55

Let 1 stand for "any given period" and 2 stand for "base period". The formula of any index number can be written as:

Question 56

Suppose we have data for 1000 students for a period of one year. The data show that those studentswho spend more hours studying have a higher grade point average (GPA). We can say that

A) there is a positive correlation between hours of study time and GPA.
B) more hours spent studying leads to a higher GPA.
C) if hours of study time increase, then GPA will automatically increase.
D) there is a causal relationship between hours of study time and GPA.
E) having a higher GPA leads students to spend more time studying.

Question 57

In order to test a theory, one must

A) present a series of normative statements and positive statements.
B) confront the predictions of the theory with evidence.
C) develop normative statements from the law of large numbers.
D) develop a better explanation than the one presented.
E) use assumptions that most closely reflect reality.

Question 58

Consider the following equation:

A) two dependent variables in a functional relation.
B) two independent variables in a functional relation.
C) a functional relation in a verbal format.
D) a functional relation between X and Y.
E) a functional relation in a schedule format.

Question 59

Which of the following pairs of words have similar meanings?

A) induced and exogenous
B) dependent and exogenous
C) independent and exogenous
D) induced and autonomous
E) endogenous and autonomous

Question 60

Economics is scientific because

A) economists can conduct controlled experiments.
B) it tests hypotheses by appealing to evidence.
C) economists use data.
D) individual behaviour is predictable.
E) economists can conduct laboratory experiments.

Question 61

Positive statements

A) are seldom employed in social sciences like economics.
B) have been verified by appeal to factual evidence.
C) have no place in economics because economics deals only with value judgments.
D) are falsifiable in principle by appeal to factual evidence.
E) form the basis of all normative arguments.

Question 62

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years. TABLE 2-2
Positively related variables change such that as the value of one variable

A) decreases, the value of the other variable decreases.
B) increases, the value of the other variable decreases.
C) increases, the value of the other variable remains the same.
D) decreases, the value of the other variable increases.
E) decreases, the value of the other variable remains the same.

Question 63

A valid theory

A) extrapolates from the past behaviour of a variable to predict its future course.
B) generates a hypothesis that can predict future events.
C) appeals to the law of large numbers.
D) allows one to prove irrefutably one's hypothesis.
E) allows one to deduce a normative statement.

Question 64

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years. TABLE 2-2
Refer to Table 2-2. Assume that 2005 is used as the base year, with the index number = 100. What is the percentage change in the per-minute charge from 2008 to 2009?

A) -25.0%
B) -10.0%
C) -35.0%
D) -71.4%
E) -28.6%

Question 65

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years. TABLE 2-2
Refer to Table 2-2. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2009 is

A) 0.45
B) 25.0
C) 2.5
D) 45.45
E) 0.25

Question 66

An economic model that contains a highly realistic set of assumptions is

A) necessarily better able to predict the future.
B) superior to a model whose assumptions are highly unrealistic.
C) more abstract than a model whose assumptions are further removed from reality.
D) useful because there is then very little difference between "theory" and "reality".
E) not likely to be useful because of its particularized nature and its intractability.

Question 67

For an index number of an average quantity or price, the weights used must add up to 1 for

A) neither a proportional-weights index nor an unweighted index.
B) price indexes only.
C) a proportional-weights index but not an unweighted index.
D) an unweighted index but not a proportional-weights index.
E) both a proportional-weights index and an unweighted index.

Question 68

The mathematical expression of a relationship between two or more variables is usually known as

A) a theory.
B) a function.
C) a definition.
D) an observation.
E) an assumption.

Question 69

A normative statement

A) is one that involves a value judgment.
B) has no place in the study and practice of economics.
C) concerns what is provable.
D) can be derived logically from facts.
E) is a statement that is empirically testable.

Question 70

Suppose point A represents co-ordinates (X=10, Y=12) and point B represents co-ordinates (X=5, Y=7). The slope of the straight line joining points A and B is

A) 2/3.
B) -1.
C) 3/2.
D) 1.
E) 5/6.

Question 71

For a given year, an index number of average prices (such as the Consumer Price Index) is the ratio of the

A) price of several goods in the given year to that in the base year.
B) average price of several goods in the base year to that in the given year.
C) average price of all goods in the given year to that in the base year.
D) weighted prices of a typical bundle of goods purchased in a given year to that in the base year.
E) weighted prices of a typical bundle of goods purchased in the base year to that in the given year.

Question 72

If we seek to explain the number of seats sold on a particular air route, say Toronto to Halifax, over a one-year period, we would consider many variables. Which of the following variables would be endogenous to our theory?

A) the unemployment rate in Toronto.
B) the number of fog days in Halifax.
C) the number of airline seats sold on this route.
D) the world price of oil.
E) the price of the same trip by train

Question 73

At the minimum or the maximum of the graph of a non-linear function (with x on the horizontal axis and y on the vertical axis) the slope of the curve is

A) infinite
B) undefined
C) -1
D) 0
E) 1

Question 74

On a coordinate graph, what is the Y intercept of the function X = 60 + 3Y?

A) 60
B) 3.0
C) 0.1
D) -20
E) 20

Question 75

Value judgments

A) are subjective opinions that cannot be proven.
B) should be the only basis for establishing public policies.
C) are the basis for all economic models.
D) can be tested and verified.
E) are basically the same for all individuals.

Question 76

An economist has data showing Canadian GDP for the years 1945-2009. The best way to illustrate these data is

A) a logarithmic scale diagram.
B) a cross-sectional bar-chart graph.
C) a time-series line graph.
D) a scatter diagram.
E) a time-series pie chart.

Question 77

The statement that a country's rate of economic growth is influenced by its firms' investment behaviour is an example of a(n)

A) prediction.
B) theory.
C) normative statement.
D) variable.
E) economic law.

Question 78

An index number expresses the value of a variable in any given period

A) as an absolute compared to the base period.
B) as a percentage of its value in the base period.
C) as a proportional weighted average.
D) as an average of its value in the base period.
E) as a weighted average.

Question 79

Suppose we observe that consumption of electricity decreases when the price of electricity rises.We can say that the two variables are related

A) negatively.
B) linearly.
C) non-linearly.
D) positively.
E) exogenously.

Question 80

Negatively related variables change such that as the value of one variable

A) increases, the value of the other decreases.
B) decreases, the value of the other variable decreases.
C) decreases, the value of the other variable remains the same.
D) increases, the value of the other variable remains the same.
E) increases, the value of the other variable increases.