Question 1

Lower inflation rates are usually correlated with lower unemployment rates.

Accepted Answer

A) True 
 B)False

Question 2

During a war, a government will often draft people, most of whom are presently employed, into the army.An economist, computing the real cost of the war, would be sure to include which of the following items?

Accepted Answer

A) the value of the civilian goods no longer produced by the new soldiers 
B) the cost of feeding and clothing the new soldiers 
C) the dollar cost of the payroll 
D) the higher prices of civilian goods due to wartime shortages 
E) the cost of transporting the soldiers to combat 
A) the value of the civilian goods no longer produced by the new soldiers 
B) the cost of feeding and clothing the new soldiers 
C) the dollar cost of the payroll 
D) the higher prices of civilian goods due to wartime shortages 
E) the cost of transporting the soldiers to combat

Question 3

Economic analysis and policy are made more difficult by

Accepted Answer

A) having so much data to work with. 
B) inadequate and imperfect information. 
C) an incomplete consensus on the basic goals of social policy. 
D) the lack of public interest and opinion on economic questions. 
E) the major economic problems society faces. 
A) having so much data to work with. 
B) inadequate and imperfect information. 
C) an incomplete consensus on the basic goals of social policy. 
D) the lack of public interest and opinion on economic questions. 
E) the major economic problems society faces.

Question 4

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 5

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full-fare if there are empty seats on the airplane?

Accepted Answer

The decision depends on the marginal, or

Question 6

Economic analysis requires both mathematical reasoning and historical study.

Accepted Answer

A) True 
 B)False

Question 7

In economics, abstraction from reality is necessary because of the complexity of the real world.

Accepted Answer

A) True 
 B)False

Question 8

Abstraction ignores many details in order to focus on the most important elements of a problem.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is correct?

Accepted Answer

A) Theory and hypothesis are interchangeable terms for the same thing. 
B) A hypothesis may result from a tested and confirmed theory. 
C) A theory may result from a tested and confirmed hypothesis. 
D) A hypothesis is a theory whose formulation relies on mathematics. 
A) Theory and hypothesis are interchangeable terms for the same thing. 
B) A hypothesis may result from a tested and confirmed theory. 
C) A theory may result from a tested and confirmed hypothesis. 
D) A hypothesis is a theory whose formulation relies on mathematics.

Question 10

An economist might be hired to answer which of the following questions?

Accepted Answer

A) What will the price of oil be next year? 
B) Why is the median income of women about half the median income of men? 
C) How much will interest rates change as the federal deficit decreases? 
D) How much will inflation change if import restrictions are imposed? 
E) All of the above are correct. 
A) What will the price of oil be next year? 
B) Why is the median income of women about half the median income of men? 
C) How much will interest rates change as the federal deficit decreases? 
D) How much will inflation change if import restrictions are imposed? 
E) All of the above are correct.

Question 11

A useful economic model

Accepted Answer

A) deals only with possibilities that actually occurred. 
B) makes only realistic assumptions. 
C) may make some unrealistic assumptions in order to simplify a complex reality. 
D) should avoid drawing conclusions that have public policy implications, since economics is not equipped to make value judgments. 
A) deals only with possibilities that actually occurred. 
B) makes only realistic assumptions. 
C) may make some unrealistic assumptions in order to simplify a complex reality. 
D) should avoid drawing conclusions that have public policy implications, since economics is not equipped to make value judgments.

Question 12

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

Accepted Answer

A) True 
 B)False

Question 13

"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have a

Accepted Answer

A) negative slope. 
B) positive slope. 
C) slope always equal to one. 
D) slope always equal to 45 degrees. 
A) negative slope. 
B) positive slope. 
C) slope always equal to one. 
D) slope always equal to 45 degrees.

Question 14

During one winter quarter at Frozen U., snow falls every Friday night.Students assume that, on their campus, Fridays cause snow.This hypothesis

Accepted Answer

A) should more properly be considered a theory. 
B) assumes that correlation implies causation. 
C) assumes that causation implies correlation. 
D) reflects the fallacy of composition. 
A) should more properly be considered a theory. 
B) assumes that correlation implies causation. 
C) assumes that causation implies correlation. 
D) reflects the fallacy of composition.

Question 15

In economic theorizing, common sense will always lead to the correct answer.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

A horizontal line always has a slope of one.

Accepted Answer

A) True 
 B)False

Question 19

Economists make assumptions because

Accepted Answer

A) they need to incorporate value judgments into their models. 
B) analysis without assumptions would be impossibly complex. 
C) they always have imperfect information about reality. 
D) assumptions are the final product of careful economic analysis. 
E) assumptions allow economists to ignore things that they cannot explain. 
A) they need to incorporate value judgments into their models. 
B) analysis without assumptions would be impossibly complex. 
C) they always have imperfect information about reality. 
D) assumptions are the final product of careful economic analysis. 
E) assumptions allow economists to ignore things that they cannot explain.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Lower inflation rates are usually correlated with lower unemployment rates.

During a war, a government will often draft people, most of whom are presently employed, into the army.An economist, computing the real cost of the war, would be sure to include which of the following items?

Economic analysis and policy are made more difficult by

Economists use models in order to

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full-fare if there are empty seats on the airplane?

Economic analysis requires both mathematical reasoning and historical study.

In economics, abstraction from reality is necessary because of the complexity of the real world.

Abstraction ignores many details in order to focus on the most important elements of a problem.

Which of the following statements is correct?

An economist might be hired to answer which of the following questions?

A useful economic model

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have a

During one winter quarter at Frozen U., snow falls every Friday night.Students assume that, on their campus, Fridays cause snow.This hypothesis

In economic theorizing, common sense will always lead to the correct answer.

Why do economists tend to create models in diagrammatic form?

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

A horizontal line always has a slope of one.

Economists make assumptions because

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

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: the Price System

The Shortcomings of Free Markets

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

Is Useconomic Leadership Threatened

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

He 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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