Question 1

A normative economic statement can be proven either true or false.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the best example of a nonrenewable resource?

Accepted Answer

A) Forests. 
B) Oil. 
C) Clean air. 
D) Fish in the ocean. 
A) Forests. 
B) Oil. 
C) Clean air. 
D) Fish in the ocean.

Question 3

The branch of economics that focuses on decision making for the economy as a whole is called:

Accepted Answer

A) normative economics. 
B) macroeconomics. 
C) microeconomics. 
D) consumer economics. 
A) normative economics. 
B) macroeconomics. 
C) microeconomics. 
D) consumer economics.

Question 4

Natural resources are:

Accepted Answer

A) not considered scarce because no one pays for them. 
B) only desired for use in producing other goods. 
C) included in the category of resources called land. 
D) available in unlimited quantities. 
A) not considered scarce because no one pays for them. 
B) only desired for use in producing other goods. 
C) included in the category of resources called land. 
D) available in unlimited quantities.

Question 5

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

Question 6

The term Ceteris paribus means that:

Accepted Answer

A) everything is changing. 
B) all other things remain unchanged. 
C) no one knows which variables will change and which will remain constant. 
D) the basic principle of economics do not apply to the case being considered. 
A) everything is changing. 
B) all other things remain unchanged. 
C) no one knows which variables will change and which will remain constant. 
D) the basic principle of economics do not apply to the case being considered.

Question 7

When economists say goods are scarce, they mean:

Accepted Answer

A) consumers are too poor to afford the goods and services available. 
B) consumers are unwilling to buy goods unless they have very low prices. 
C) goods are generally freely available from nature in most countries. 
D) the desire for goods and services exceeds our ability to produce them with the limited resources available. 
A) consumers are too poor to afford the goods and services available. 
B) consumers are unwilling to buy goods unless they have very low prices. 
C) goods are generally freely available from nature in most countries. 
D) the desire for goods and services exceeds our ability to produce them with the limited resources available.

Question 8

A good economic model should capture as many details about real-world behavior as possible.

Accepted Answer

A) True 
 B)False

Question 9

When economists use the term Ceteris paribus , they are indicating that:

Accepted Answer

A) the relationship between two economic variables cannot be determined. 
B) the analysis is true for the individual but not for the economy as a whole. 
C) all other variables except the ones specified are assumed to be constant. 
D) their conclusions are based on normative economics rather than positive economic analysis. 
A) the relationship between two economic variables cannot be determined. 
B) the analysis is true for the individual but not for the economy as a whole. 
C) all other variables except the ones specified are assumed to be constant. 
D) their conclusions are based on normative economics rather than positive economic analysis.

Question 10

The central question in economics is how to:

Accepted Answer

A) deal with the problem of scarcity. 
B) change government economic policy. 
C) change people's wants to match their needs. 
D) manage money and become wealthy. 
A) deal with the problem of scarcity. 
B) change government economic policy. 
C) change people's wants to match their needs. 
D) manage money and become wealthy.

Question 11

When building a model, an economist must:

Accepted Answer

A) adjust for exceptional situations. 
B) provide a complete description of reality. 
C) make simplifying assumptions. 
D) develop a set of behavioral equations. 
A) adjust for exceptional situations. 
B) provide a complete description of reality. 
C) make simplifying assumptions. 
D) develop a set of behavioral equations.

Question 12

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

Accepted Answer

A) why do national economies grow. 
B) what determines a nation's savings and investments. 
C) how does a central bank influence inflation. 
D) why does a country experience recessions. 
E) how does Microsoft price its software packages. 
A) why do national economies grow. 
B) what determines a nation's savings and investments. 
C) how does a central bank influence inflation. 
D) why does a country experience recessions. 
E) how does Microsoft price its software packages.

Question 13

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

Accepted Answer

A) True 
 B)False

Question 14

The basic purpose of economic models is to:

Accepted Answer

A) construct simplifying assumptions about the real world. 
B) explain reality in all its complexity. 
C) construct situations where controlled experiments can be carried out. 
D) provide explanations for, and predictions of the relationship between variables. 
A) construct simplifying assumptions about the real world. 
B) explain reality in all its complexity. 
C) construct situations where controlled experiments can be carried out. 
D) provide explanations for, and predictions of the relationship between variables.

Question 15

Policies to increase the supply of money in the economy are primarily a concern of microeconomics.

Accepted Answer

A) True 
 B)False

Question 16

A positive economic statement is:

Accepted Answer

A) an opinion of an action that should be taken. 
B) an action that will have a positive effect on the economy. 
C) a statement testable by facts. 
D) a claim that the speaker is positive will occur. 
E) always a microeconomic position. 
A) an opinion of an action that should be taken. 
B) an action that will have a positive effect on the economy. 
C) a statement testable by facts. 
D) a claim that the speaker is positive will occur. 
E) always a microeconomic position.

Question 17

What is the difference between positive and normative economics? How can knowledge of positive economics be useful in normative economics?

Accepted Answer

Positive economics deals with "what is"

Question 18

Human wants:

Accepted Answer

A) are unfilled only in the poorer countries of the world. 
B) can be completely satisfied by advancing technology. 
C) can never be fully satisfied. 
D) only apply to necessities. 
E) exist only if we are selfish. 
A) are unfilled only in the poorer countries of the world. 
B) can be completely satisfied by advancing technology. 
C) can never be fully satisfied. 
D) only apply to necessities. 
E) exist only if we are selfish.

Question 19

Economists believe that scarcity forces everyone to:

Accepted Answer

A) satisfy all their wants. 
B) abandon consumer sovereignty. 
C) lie about their wants. 
D) create unlimited resources. 
E) make choices. 
A) satisfy all their wants. 
B) abandon consumer sovereignty. 
C) lie about their wants. 
D) create unlimited resources. 
E) make choices.

Question 20

Which phrase(s)is (are)associated with normative statements?

Accepted Answer

A) c and e. 
B) Has been shown. 
C) Should be. 
D) Can be. 
E) More than. 
A) c and e. 
B) Has been shown. 
C) Should be. 
D) Can be. 
E) More than.

Exam 1: Introducing the Economic Way of Thinking

A normative economic statement can be proven either true or false.

Which of the following is the best example of a nonrenewable resource?

The branch of economics that focuses on decision making for the economy as a whole is called:

Natural resources are:

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

The term Ceteris paribus means that:

When economists say goods are scarce, they mean:

A good economic model should capture as many details about real-world behavior as possible.

When economists use the term Ceteris paribus , they are indicating that:

The central question in economics is how to:

When building a model, an economist must:

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

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

The basic purpose of economic models is to:

Policies to increase the supply of money in the economy are primarily a concern of microeconomics.

A positive economic statement is:

What is the difference between positive and normative economics? How can knowledge of positive economics be useful in normative economics?

Human wants:

Economists believe that scarcity forces everyone to:

Which phrase(s)is (are)associated with normative statements?

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

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

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Normative economics deals with and positive economics deals with .