Question 1

Attempts by the government to reduce the rate of inflation often result in higher unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 2

Why do economists tend to create models in diagrammatic form?

Accepted Answer

A)  Diagrams hide reality, and theory is an attempt to avoid reality. 
B)  It is easier than building models out of physical objects. 
C)  Economic reality cannot possibly be represented except in diagrams. 
D)  Most economists are frustrated artists, and like to draw when possible. 
E)  All of the above are correct. 
A)  Diagrams hide reality, and theory is an attempt to avoid reality. 
B)  It is easier than building models out of physical objects. 
C)  Economic reality cannot possibly be represented except in diagrams. 
D)  Most economists are frustrated artists, and like to draw when possible. 
E)  All of the above are correct.

Question 3

Externalities affect only the buyer and seller involved in an exchange.

Accepted Answer

A) True 
 B)False

Question 4

Eliminating important details in economic analysis is necessary to understand the complexity of the economy.

Accepted Answer

A) True 
 B)False

Question 5

Marginal analysis involves looking at the extra costs involved in a decision.

Accepted Answer

A) True 
 B)False

Question 6

Economists use models in order to

Accepted Answer

A)  experiment with alternative circumstances. 
B)  make educated guesses about real life events. 
C)  predict outcomes under various hypothetical conditions. 
D)  increase understanding of how a relationship actually works. 
E)  All of the above are correct. 
A)  experiment with alternative circumstances. 
B)  make educated guesses about real life events. 
C)  predict outcomes under various hypothetical conditions. 
D)  increase understanding of how a relationship actually works. 
E)  All of the above are correct.

Question 7

Which of the following is an example of a fiscal policy initiative?

Accepted Answer

A)  Lowering of interest rates. 
B)  Increase in reserve requirements. 
C)  Reduction in taxes. 
D)  Decrease in money supply. 
A)  Lowering of interest rates. 
B)  Increase in reserve requirements. 
C)  Reduction in taxes. 
D)  Decrease in money supply.

Question 8

Slope is measured as run/rise.

Accepted Answer

A) True 
 B)False

Question 9

Even though international trade in undertaken voluntarily, a country that engages in trade may not benefit from it.

Accepted Answer

A) True 
 B)False

Question 10

When interdiction efforts manage to stem the flow of illegal drugs into the United States, assuming no change in demand, the price of these substances rises.This price increase leads to more crime as addicts attempt to maintain their now more-expensive habits.Economists call this side-effect of the drug business

Accepted Answer

A)  the illusion of rationality. 
B)  an externality. 
C)  the cost disease of personal services. 
D)  inflation. 
E)  unemployment. 
A)  the illusion of rationality. 
B)  an externality. 
C)  the cost disease of personal services. 
D)  inflation. 
E)  unemployment.

Question 11

What is the role of value judgments in economic analysis?

Accepted Answer

Economists employ value judgments in mak

Question 12

The United States produces both automobiles and computers more efficiently than Mexico.Nevertheless, it is possible that both nations would benefit from trade in these items.The reason for this is

Accepted Answer

A)  the law of comparative advantage. 
B)  the inflation-unemployment trade-off. 
C)  externalities. 
D)  the cost disease of personal services. 
E)  attempts to repeal the law of supply and demand. 
A)  the law of comparative advantage. 
B)  the inflation-unemployment trade-off. 
C)  externalities. 
D)  the cost disease of personal services. 
E)  attempts to repeal the law of supply and demand.

Question 13

Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being.

Accepted Answer

A) True 
 B)False

Question 14

Two variables that systematically change together are correlated.

Accepted Answer

A) True 
 B)False

Question 15

Suppose Tammy grew up on a farm and is very good at plowing.In addition suppose she is a popular country singer who earns $4,000 per performance.If her husband Bob can plow (but not as well as Tammy) but he can't carry a tune, then it would be most efficient if

Accepted Answer

A)  Tammy did both the plowing and the singing. 
B)  Tammy specialized in plowing and Bob in singing. 
C)  Bob did both the plowing and singing. 
D)  Tammy specialized in singing and Bob in plowing. 
E)  They both plowed and sang. 
A)  Tammy did both the plowing and the singing. 
B)  Tammy specialized in plowing and Bob in singing. 
C)  Bob did both the plowing and singing. 
D)  Tammy specialized in singing and Bob in plowing. 
E)  They both plowed and sang.

Question 16

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

Accepted Answer

A) True 
 B)False

Question 17

Because there is a trade-off between total output and equality of income distribution,

Accepted Answer

A)  greater equality of distribution will generally result in higher levels of output. 
B)  greater output is generally associated with more equal distribution. 
C)  policies designed to increase output will only succeed if distribution is more equal. 
D)  policies intended to expand output must necessarily fail. 
E)  policies designed to equalize distribution may adversely affect the size of output. 
A)  greater equality of distribution will generally result in higher levels of output. 
B)  greater output is generally associated with more equal distribution. 
C)  policies designed to increase output will only succeed if distribution is more equal. 
D)  policies intended to expand output must necessarily fail. 
E)  policies designed to equalize distribution may adversely affect the size of output.

Question 18

There is no trade-off between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 19

The lower left-hand corner of a graph where the two axes meet is called the graph's origin.

Accepted Answer

A) True 
 B)False

Question 20

The growth rate of productivity is the most important determinant of material well-being in the short run.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics?

Attempts by the government to reduce the rate of inflation often result in higher unemployment in the short run.

Why do economists tend to create models in diagrammatic form?

Externalities affect only the buyer and seller involved in an exchange.

Eliminating important details in economic analysis is necessary to understand the complexity of the economy.

Marginal analysis involves looking at the extra costs involved in a decision.

Economists use models in order to

Which of the following is an example of a fiscal policy initiative?

Slope is measured as run/rise.

Even though international trade in undertaken voluntarily, a country that engages in trade may not benefit from it.

What is the role of value judgments in economic analysis?

The United States produces both automobiles and computers more efficiently than Mexico.Nevertheless, it is possible that both nations would benefit from trade in these items.The reason for this is

Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being.

Two variables that systematically change together are correlated.

Suppose Tammy grew up on a farm and is very good at plowing.In addition suppose she is a popular country singer who earns $4,000 per performance.If her husband Bob can plow (but not as well as Tammy) but he can't carry a tune, then it would be most efficient if

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

Because there is a trade-off between total output and equality of income distribution,

There is no trade-off between efficiency and equality.

The lower left-hand corner of a graph where the two axes meet is called the graph's origin.

The growth rate of productivity is the most important determinant of material well-being in the short run.

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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