Exam 2: Thinking Like an Economist

Which of the following statements are positive,and which are normative? a.The minimum wage creates unemployment among young and unskilled workers. b.The minimum wage ought to be abolished. c.If the price of a product in a market decreases, other things equal, quantity demanded will increase. d.A little bit of inflation is worse for society than a little bit of unemployment. e.There is a tradeoff between inflation and unemployment in the short run. f.If consumer income increases, other things equal, the demand for automobiles will increase. g.The U.S.income distribution is not equitable. h.U.S.workers deserve more liberal unemployment benefits. i.If interest rates increase, investment will decrease. j.If welfare benefits were reduced, the country would be better off.

The country of Econoland produces two goods,textbooks and widgets.Last year it produced 200 textbooks and 500 widgets.This year it produced 250 textbooks and 600 widgets.Given no other information,which of the following events could not explain this change?

Which of the following statements applies to economics,as well as to other sciences such as physics?

When two variables have a negative correlation,

The 1973 war in the Middle East provided economists with the opportunity to observe the negative relationship between

Economic models are built with

A demand curve shows the relationship

Another term for factors of production is

Figure 2-3 -Refer to Figure 2-3.The economy has the ability to produce at which point or points?

Figure 2-5 -Refer to Figure 2-5.Which of the following events would explain the shift of the production possibilities frontier from A to B?

"Prices rise when the quantity of money rises rapidly" is an example of a

An economic outcome is said to be efficient if the economy is

Production is efficient if the economy is producing at a point

One way to characterize the difference between positive statements and normative statements is as follows:

Figure 2-11 -Refer to Figure 2-11.The opportunity cost of more doghouses increases as more doghouses are produced.

Who said,"The whole of science is nothing more than the refinement of everyday thinking?"

Two variables that are negatively related will move in opposite directions.

Economic models

A production possibilities frontier that is a straight line shows

Robert McTeer,the former President of the Federal Reserve Bank of Dallas,asserted in a commencement address that the study of economics