Question 1

Which statement most accurately defines economics?

Accepted Answer

A) Economics is the study of how people make money. 
B) Economics is the study of how people make choices to satisfy their wants. 
C) Economics is the study of values a society should choose. 
D) Economics is the study of how to eliminate scarcity. 
A) Economics is the study of how people make money. 
B) Economics is the study of how people make choices to satisfy their wants. 
C) Economics is the study of values a society should choose. 
D) Economics is the study of how to eliminate scarcity.

Question 2

Which of the following is an example of an application of the ceteris paribus assumption?

Accepted Answer

A) An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant 
B) An analysis of how people purchase more goods when prices decline and income increases 
C) After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase 
D) An analysis of how worker productivity increases when a firm invests in new machines and training programs 
A) An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant 
B) An analysis of how people purchase more goods when prices decline and income increases 
C) After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase 
D) An analysis of how worker productivity increases when a firm invests in new machines and training programs

Question 3

Economics is the study of

Accepted Answer

A) how to get rich. 
B) how people allocate their limited resources to satisfy their unlimited wants. 
C) how people spend their income. 
D) why people want certain goods and services rather than other goods and services. 
A) how to get rich. 
B) how people allocate their limited resources to satisfy their unlimited wants. 
C) how people spend their income. 
D) why people want certain goods and services rather than other goods and services.

Question 4

Economists assume that people are motivated by

Accepted Answer

A) benevolence. 
B) altruism. 
C) greed. 
D) rational self-interest. 
A) benevolence. 
B) altruism. 
C) greed. 
D) rational self-interest.

Question 5

What would lead an economist to conclude that Theory A is superior to Theory B?

Accepted Answer

A) Theory A predicts real-world events better than does Theory B. 
B) The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B. 
C) Theory A explains how people think, whereas Theory B only explains what they do. 
D) Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly. 
A) Theory A predicts real-world events better than does Theory B. 
B) The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B. 
C) Theory A explains how people think, whereas Theory B only explains what they do. 
D) Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly.

Question 6

Given a linear curve, the value on the y-axis changes from 100 to 120 when the value on the x-axis changes from 20 to 10, then the slope of that curve is

Accepted Answer

A) -20. 
B) +20. 
C) -2. 
D) +2. 
A) -20. 
B) +20. 
C) -2. 
D) +2.

Question 7

Economic models

Accepted Answer

A) are used to explain how people think. 
B) are used to explain how people behave. 
C) are essential representations of the real world. 
D) are never used for making economic projections or predictions. 
A) are used to explain how people think. 
B) are used to explain how people behave. 
C) are essential representations of the real world. 
D) are never used for making economic projections or predictions.

Question 8

Economists assume people are motivated by

Accepted Answer

A) unlimited resources. 
B) pride. 
C) self-interest. 
D) social justice. 
A) unlimited resources. 
B) pride. 
C) self-interest. 
D) social justice.

Question 9

Which of these social sciences deals most with models of behavior rather than with thought processes?

Accepted Answer

A) psychology 
B) sociology 
C) psychiatry 
D) economics 
A) psychology 
B) sociology 
C) psychiatry 
D) economics

Question 10

People respond to incentives

Accepted Answer

A) by ignoring negative incentives and responding to positive incentives only. 
B) only when they are irrational. 
C) as they never intentionally make decisions that would leave them worse off. 
D) when they have low incomes. 
A) by ignoring negative incentives and responding to positive incentives only. 
B) only when they are irrational. 
C) as they never intentionally make decisions that would leave them worse off. 
D) when they have low incomes.

Question 11

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Accepted Answer

A)  irrationality hypothesis. 
B) ceteris paribus hypothesis. 
C) individual aggregation hypothesis. 
D) bounded rationality hypothesis. 
A)  irrationality hypothesis. 
B) ceteris paribus hypothesis. 
C) individual aggregation hypothesis. 
D) bounded rationality hypothesis.

Question 12

Economics is called an empirical science because

Accepted Answer

A) economists study real-world evidence to test their models. 
B) economists use assumptions in their models. 
C) economic models have no predictive power. 
D) economic analysis is only useful in a capitalistic society. 
A) economists study real-world evidence to test their models. 
B) economists use assumptions in their models. 
C) economic models have no predictive power. 
D) economic analysis is only useful in a capitalistic society.

Question 13

When the text refers to rational self-interest, it means

Accepted Answer

A) your looking out for what is best for you as an individual. 
B) your focus on your own contributions to society. 
C) behavior that makes society better off. 
D) behavior that helps your employer earn higher profits. 
A) your looking out for what is best for you as an individual. 
B) your focus on your own contributions to society. 
C) behavior that makes society better off. 
D) behavior that helps your employer earn higher profits.

Question 14

One topic of study for a microeconomist would be the

Accepted Answer

A) causes of inflation. 
B) causes of a nation's unemployment level. 
C) effects of a gasoline price increase on consumer behavior. 
D) effects of an increase in government spending on overall economic activity. 
A) causes of inflation. 
B) causes of a nation's unemployment level. 
C) effects of a gasoline price increase on consumer behavior. 
D) effects of an increase in government spending on overall economic activity.

Question 15

Because resources are scarce relative to wants, the study of economics concerns

Accepted Answer

A) how money is important to people. 
B) how individuals, businesses, and governments make choices. 
C) how money is used to buy what people want. 
D) None of the above are correct. 
A) how money is important to people. 
B) how individuals, businesses, and governments make choices. 
C) how money is used to buy what people want. 
D) None of the above are correct.

Question 16

Which of the following topics is a macroeconomic subject?

Accepted Answer

A) a proposed merger between two companies 
B) the level of sales at a particular department store 
C) increases in the overall price level of the United States 
D) the decision of an automobile manufacturer 
A) a proposed merger between two companies 
B) the level of sales at a particular department store 
C) increases in the overall price level of the United States 
D) the decision of an automobile manufacturer

Question 17

What is the economic way of thinking, and why is it important?

Accepted Answer

The economic way of thinking provides a

Question 18

Economic analysis is used

Accepted Answer

A) only in economics classrooms. 
B) only by business people. 
C) only by policy makers. 
D) in all decision making. 
A) only in economics classrooms. 
B) only by business people. 
C) only by policy makers. 
D) in all decision making.

Question 19

A microeconomist would study all of the following issues EXCEPT

Accepted Answer

A) the impact of a change in consumer income on the sales of corn. 
B) the impact of a snowstorm on the sales of snow shovels. 
C) the most efficient means for General Motors to produce an automobile. 
D) the effect of a change in income taxes on the nation's rate of unemployment. 
A) the impact of a change in consumer income on the sales of corn. 
B) the impact of a snowstorm on the sales of snow shovels. 
C) the most efficient means for General Motors to produce an automobile. 
D) the effect of a change in income taxes on the nation's rate of unemployment.

Question 20

Macroeconomics deals with ________ while microeconomics deals with ________.

Accepted Answer

A) choices important to people; choices not important to people 
B) economywide choices; choices of individuals 
C) choices that involve money; choices that does not involve money 
D) choices of rich people; choices of poor people 
A) choices important to people; choices not important to people 
B) economywide choices; choices of individuals 
C) choices that involve money; choices that does not involve money 
D) choices of rich people; choices of poor people

Which statement most accurately defines economics?

Which of the following is an example of an application of the ceteris paribus assumption?

Economics is the study of

Economists assume that people are motivated by

What would lead an economist to conclude that Theory A is superior to Theory B?

Given a linear curve, the value on the y-axis changes from 100 to 120 when the value on the x-axis changes from 20 to 10, then the slope of that curve is

Economic models

Economists assume people are motivated by

Which of these social sciences deals most with models of behavior rather than with thought processes?

People respond to incentives

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Economics is called an empirical science because

When the text refers to rational self-interest, it means

One topic of study for a microeconomist would be the

Because resources are scarce relative to wants, the study of economics concerns

Which of the following topics is a macroeconomic subject?

What is the economic way of thinking, and why is it important?

Economic analysis is used

A microeconomist would study all of the following issues EXCEPT

Macroeconomics deals with while microeconomics deals with .

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 1: The Nature of Economics

Which statement most accurately defines economics?

Which of the following is an example of an application of the ceteris paribus assumption?

Economics is the study of

Economists assume that people are motivated by

What would lead an economist to conclude that Theory A is superior to Theory B?

Given a linear curve, the value on the y-axis changes from 100 to 120 when the value on the x-axis changes from 20 to 10, then the slope of that curve is

Economic models

Economists assume people are motivated by

Which of these social sciences deals most with models of behavior rather than with thought processes?

People respond to incentives

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Economics is called an empirical science because

When the text refers to rational self-interest, it means

One topic of study for a microeconomist would be the

Because resources are scarce relative to wants, the study of economics concerns

Which of the following topics is a macroeconomic subject?

What is the economic way of thinking, and why is it important?

Economic analysis is used

A microeconomist would study all of the following issues EXCEPT

Macroeconomics deals with ________ while microeconomics deals with ________.

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Macroeconomics deals with while microeconomics deals with .