Question 1

A circular-flow diagram is a visual model of how an economy is organized.

Accepted Answer

A) True 
 B)False

Question 2

Unemployment would cause an economy to

Accepted Answer

A) produce inside its production possibilities frontier. 
B) produce on its production possibilities frontier. 
C) produce outside its production possibilities frontier. 
D) experience an inward shift of its production possibilities frontier. 
A) produce inside its production possibilities frontier. 
B) produce on its production possibilities frontier. 
C) produce outside its production possibilities frontier. 
D) experience an inward shift of its production possibilities frontier.

Question 3

Which is the best statement about the roles of economists?

Accepted Answer

A) Economists are best viewed as policymakers. 
B) Economists are best viewed as scientists. 
C) In trying to explain the world, economists are policymakers; in trying to improve the world, they are scientists. 
D) In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers. 
A) Economists are best viewed as policymakers. 
B) Economists are best viewed as scientists. 
C) In trying to explain the world, economists are policymakers; in trying to improve the world, they are scientists. 
D) In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers.

Question 4

Figure 2-7
  
-Refer to Figure 2-7.The shift of the production possibilities frontier from A to B can best be described as

Accepted Answer

A) a downturn in the economy. 
B) economic growth. 
C) an enhancement of equity. 
D) an improvement in the allocation of resources. 
A) a downturn in the economy. 
B) economic growth. 
C) an enhancement of equity. 
D) an improvement in the allocation of resources.

Question 5

The circular-flow diagram is a

Accepted Answer

A) visual model of how the economy is organized. 
B) visual model of the relationships among money, prices, and businesses. 
C) model that shows the effects of government on the economy. 
D) mathematical model of how the economy works. 
A) visual model of how the economy is organized. 
B) visual model of the relationships among money, prices, and businesses. 
C) model that shows the effects of government on the economy. 
D) mathematical model of how the economy works.

Question 6

An economic theory about international trade that is based on the assumption that there are only two countries and two goods

Accepted Answer

A) can be useful in helping economists understand the complex world of international trade involving many countries and many goods. 
B) is useless, since the real world has many countries trading many goods. 
C) can be useful only in situations involving two countries and two goods. 
D) can be useful in the classroom, but is useless in the real world. 
A) can be useful in helping economists understand the complex world of international trade involving many countries and many goods. 
B) is useless, since the real world has many countries trading many goods. 
C) can be useful only in situations involving two countries and two goods. 
D) can be useful in the classroom, but is useless in the real world.

Question 7

While the scientific method is applicable to studying natural sciences,it is not useful in studying an economic system.

Accepted Answer

A) True 
 B)False

Question 8

The slope of a straight line is calculated by

Accepted Answer

A) rise divided by run. 
B) run divided by rise. 
C) rise minus run. 
D) rise plus run. 
A) rise divided by run. 
B) run divided by rise. 
C) rise minus run. 
D) rise plus run.

Question 9

Figure 2-9
  
-Refer to Figure 2-9.The graph shown is known as a

Accepted Answer

A) time series. 
B) bar graph. 
C) scatterplot. 
D) pie chart. 
A) time series. 
B) bar graph. 
C) scatterplot. 
D) pie chart.

Question 10

Suppose the variable y is measured along the vertical axis on a graph.When the value of y changes,the curve will

Accepted Answer

A) rotate. 
B) shift. 
C) become irrelevant. 
D) None of the above is correct. 
A) rotate. 
B) shift. 
C) become irrelevant. 
D) None of the above is correct.

Question 11

Which of the following statements is correct about the extent of disagreement among economists?

Accepted Answer

A) There is a great deal of agreement among economists on virtually every economic issue. 
B) There is a great deal of agreement among economists on many important economic issues. 
C) All disagreements among economists are attributable to differences in their values. 
D) All disagreements among economists are attributable to the fact that different economists have different degrees of faith in the validity of alternative economic theories. 
A) There is a great deal of agreement among economists on virtually every economic issue. 
B) There is a great deal of agreement among economists on many important economic issues. 
C) All disagreements among economists are attributable to differences in their values. 
D) All disagreements among economists are attributable to the fact that different economists have different degrees of faith in the validity of alternative economic theories.

Question 12

A normative statement describes how the world

Accepted Answer

A) was in the past. 
B) is in the present. 
C) will be in the future. 
D) ought to be. 
A) was in the past. 
B) is in the present. 
C) will be in the future. 
D) ought to be.

Question 13

Figure 2-1
  
-Refer to Figure 2-1.Which arrow shows the flow of income payments?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 14

If government regulations designed to protect wetlands removed very productive farmland from production,the production possibilities would shift inward.

Accepted Answer

A) True 
 B)False

Question 15

A person who has fallen for the broken window fallacy might make which of the following claims?

Accepted Answer

A) To break a window is to ask for seven years of bad luck. 
B) Scientific thinking would never advance if it were not for the inadvertent breaking down of old ways of thinking. 
C) Any activity which entails an unintended consequence is not worth pursuing. 
D) The construction boom in the Gulf Coast states following the catastrophic Hurricane Katrina of 2005 proves that hurricanes eventually increase incomes in affected regions. 
A) To break a window is to ask for seven years of bad luck. 
B) Scientific thinking would never advance if it were not for the inadvertent breaking down of old ways of thinking. 
C) Any activity which entails an unintended consequence is not worth pursuing. 
D) The construction boom in the Gulf Coast states following the catastrophic Hurricane Katrina of 2005 proves that hurricanes eventually increase incomes in affected regions.

Question 16

Which of the following areas of study typifies macroeconomics as opposed to microeconomics?

Accepted Answer

A) the effects of rent control on the availability of housing in New York City 
B) the economic impact of tornadoes on cities and towns in Oklahoma 
C) how tariffs on shoes affects the shoe industry 
D) the effect on the economy of changes in the nation's unemployment rate 
A) the effects of rent control on the availability of housing in New York City 
B) the economic impact of tornadoes on cities and towns in Oklahoma 
C) how tariffs on shoes affects the shoe industry 
D) the effect on the economy of changes in the nation's unemployment rate

Question 17

Figure 2-9
  
-Refer to Figure 2-9.Taking cause and effect into account,which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep?

Accepted Answer

A) The less coffee a person drinks per day, the more time he can go without sleep. 
B) There is no relationship between how much coffee per day a person drinks and how long he can go without sleep. 
C) The more coffee a person drinks per day, the longer he can go without sleep. 
D) The relationship between cups of coffee per day and time without sleep is too unpredictable to consider. 
A) The less coffee a person drinks per day, the more time he can go without sleep. 
B) There is no relationship between how much coffee per day a person drinks and how long he can go without sleep. 
C) The more coffee a person drinks per day, the longer he can go without sleep. 
D) The relationship between cups of coffee per day and time without sleep is too unpredictable to consider.

Question 18

The Federal Reserve

Accepted Answer

A) designs tax policy. 
B) enforces the nation's antitrust laws. 
C) sets the nation's monetary policy. 
D) analyzes data on workers. 
A) designs tax policy. 
B) enforces the nation's antitrust laws. 
C) sets the nation's monetary policy. 
D) analyzes data on workers.

Question 19

Who among the following individuals majored in economics as a college student?

Accepted Answer

A) Arnold Schwartzenegger, governor of California 
B) Ronald Reagan, president of the United States 
C) Tiger Woods, golfer 
D) All of the above are correct. 
A) Arnold Schwartzenegger, governor of California 
B) Ronald Reagan, president of the United States 
C) Tiger Woods, golfer 
D) All of the above are correct.

Question 20

Identify each of the following topics as being part of microeconomics or macroeconomics:
a.the impact of a change in consumer income on the purchase of luxury automobiles
b.the effect of a change in the price of Coke on the purchase of Pepsi
c.the impact of a war in the Middle East on the rate of inflation in the United States
d.factors influencing the rate of economic growth
e.factors influencing the demand for tractors
f.the impact of tax policy on national saving
g.the effect of pollution taxes on the U.S.copper industry
h.the degree of competition in the cable television industry
i.the effect of a balanced-budget amendment on economic stability
j.the impact of deregulation on the savings and loan industry

Accepted Answer

a,b,e,g,h,and j are

Exam 2: Thinking Like an Economist

A circular-flow diagram is a visual model of how an economy is organized.

Unemployment would cause an economy to

Which is the best statement about the roles of economists?

Figure 2-7 -Refer to Figure 2-7.The shift of the production possibilities frontier from A to B can best be described as

The circular-flow diagram is a

An economic theory about international trade that is based on the assumption that there are only two countries and two goods

While the scientific method is applicable to studying natural sciences,it is not useful in studying an economic system.

The slope of a straight line is calculated by

Figure 2-9 -Refer to Figure 2-9.The graph shown is known as a

Suppose the variable y is measured along the vertical axis on a graph.When the value of y changes,the curve will

Which of the following statements is correct about the extent of disagreement among economists?

A normative statement describes how the world

Figure 2-1 -Refer to Figure 2-1.Which arrow shows the flow of income payments?

If government regulations designed to protect wetlands removed very productive farmland from production,the production possibilities would shift inward.

A person who has fallen for the broken window fallacy might make which of the following claims?

Which of the following areas of study typifies macroeconomics as opposed to microeconomics?

Figure 2-9 -Refer to Figure 2-9.Taking cause and effect into account,which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep?

The Federal Reserve

Who among the following individuals majored in economics as a college student?

Ten Principles of Economics

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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