Question 1

Which of the following topics is a macroeconomic subject?

Accepted Answer

A)  a proposed merger between two companies 
B)  the level of Christmas sales at a particular department store 
C)  the unemployment rate of the United States economy as a whole 
D)  the advertising strategy of a particular automobile firm 
A)  a proposed merger between two companies 
B)  the level of Christmas sales at a particular department store 
C)  the unemployment rate of the United States economy as a whole 
D)  the advertising strategy of a particular automobile firm

Question 2

Which of the following statements about economic models is true?

Accepted Answer

A)  A good economic model is complex. 
B)  A good model does not rely on any assumptions. 
C)  Every model is based on a set of assumptions. 
D)  Economic models are designed to explain what people need. 
A)  A good economic model is complex. 
B)  A good model does not rely on any assumptions. 
C)  Every model is based on a set of assumptions. 
D)  Economic models are designed to explain what people need.

Question 3

Shelley's grandmother gave her a sweater for her birthday, but Shelley wanted a DVD. This implies that

Accepted Answer

A)  Shelley's grandmother is not acting out of self-interest because she knows that Shelley really wanted a DVD. 
B)  Shelley's grandmother is acting out of self-interest because she wanted to give Shelley something useful. 
C)  it is in Shelley's self-interest to refuse to wear the sweater. 
D)  Shelley should exchange the sweater for a DVD. 
A)  Shelley's grandmother is not acting out of self-interest because she knows that Shelley really wanted a DVD. 
B)  Shelley's grandmother is acting out of self-interest because she wanted to give Shelley something useful. 
C)  it is in Shelley's self-interest to refuse to wear the sweater. 
D)  Shelley should exchange the sweater for a DVD.

Question 4

Which of the following would most likely NOT be taught in a microeconomics course?

Accepted Answer

A)  changes in prices of automobiles 
B)  the effects of a gas tax on gas purchases 
C)  the effect of an increase in wheat prices on farmers' behavior 
D)  the unemployment rate 
A)  changes in prices of automobiles 
B)  the effects of a gas tax on gas purchases 
C)  the effect of an increase in wheat prices on farmers' behavior 
D)  the unemployment rate

Question 5

Self-interest

Accepted Answer

A)  relates strictly to material well-being, such as a person's stock of wealth at a point in time. 
B)  is measured entirely based on an individual's income, whether earned from labor or inherited. 
C)  is inconsistent with economic analysis, which suggests that self-interest is irrational. 
D)  can involve any action that makes a person feel better off, such as charitable contributions. 
A)  relates strictly to material well-being, such as a person's stock of wealth at a point in time. 
B)  is measured entirely based on an individual's income, whether earned from labor or inherited. 
C)  is inconsistent with economic analysis, which suggests that self-interest is irrational. 
D)  can involve any action that makes a person feel better off, such as charitable contributions.

Question 6

Economists develop models to

Accepted Answer

A)  capture every detail of the real world. 
B)  make their arguments more realistic. 
C)  justify the assumptions they make about people's behavior. 
D)  help us understand economic phenomena in the real world. 
A)  capture every detail of the real world. 
B)  make their arguments more realistic. 
C)  justify the assumptions they make about people's behavior. 
D)  help us understand economic phenomena in the real world.

Question 7

One major assumption of economics is that people

Accepted Answer

A)  act as if they systematically pursue self-interest. 
B)  behave randomly without any predictable pattern. 
C)  are sometimes rational and sometimes irrational. 
D)  always pursue the interests of others. 
A)  act as if they systematically pursue self-interest. 
B)  behave randomly without any predictable pattern. 
C)  are sometimes rational and sometimes irrational. 
D)  always pursue the interests of others.

Question 8

People behave rationally when they

Accepted Answer

A)  follow the advice of government leaders. 
B)  never have regrets about their decisions. 
C)  make decisions they think will make themselves better off. 
D)  make decisions solely based on financial outcomes. 
A)  follow the advice of government leaders. 
B)  never have regrets about their decisions. 
C)  make decisions they think will make themselves better off. 
D)  make decisions solely based on financial outcomes.

Question 9

The President's statement that "to encourage economic growth, taxes should be cut,"

Accepted Answer

A)  would be an example of a normative statement. 
B)  would be an example of a positive statement. 
C)  would be an example of a microeconomic statement. 
D)  would be a statement of mercantilist economic philosophy. 
A)  would be an example of a normative statement. 
B)  would be an example of a positive statement. 
C)  would be an example of a microeconomic statement. 
D)  would be a statement of mercantilist economic philosophy.

Question 10

Economic models are used to

Accepted Answer

A)  simplify reality to predict outcomes. 
B)  exactly replicate reality. 
C)  predict all possible outcomes of a study. 
D)  determine the thoughts of individuals. 
A)  simplify reality to predict outcomes. 
B)  exactly replicate reality. 
C)  predict all possible outcomes of a study. 
D)  determine the thoughts of individuals.

Question 11

Which one of the following is an example of a normative statement?

Accepted Answer

A)  Public school teachers are not paid enough. 
B)  The average public school teacher earns less than the average truck driver. 
C)  The average public school teacher earns more than the average truck driver. 
D)  Students in smaller classes perform better on standardized tests. 
A)  Public school teachers are not paid enough. 
B)  The average public school teacher earns less than the average truck driver. 
C)  The average public school teacher earns more than the average truck driver. 
D)  Students in smaller classes perform better on standardized tests.

Question 12

Which of the following is a behavioral implication of bounded rationality?

Accepted Answer

A)  unbounded selfishness 
B)  a rule of thumb 
C)  a rational mistake 
D)  a nervous breakdown 
A)  unbounded selfishness 
B)  a rule of thumb 
C)  a rational mistake 
D)  a nervous breakdown

Question 13

The primary purpose of economics is to understand how people make

Accepted Answer

A)  money. 
B)  goods and services. 
C)  choices. 
D)  a comfortable living. 
A)  money. 
B)  goods and services. 
C)  choices. 
D)  a comfortable living.

Question 14

Normative economics involves

Accepted Answer

A)  a statement of fact. 
B)  a statement of "what should be." 
C)  a statement of "what is." 
D)  a statement that is purely descriptive. 
A)  a statement of fact. 
B)  a statement of "what should be." 
C)  a statement of "what is." 
D)  a statement that is purely descriptive.

Question 15

Which of the following statements is an example of positive economic analysis?

Accepted Answer

A)  The inflation rate is too high. 
B)  The government should worry less about inflation and more about unemployment. 
C)  If the government increases the rate of growth of the money supply, the inflation rate will increase, ceteris paribus. 
D)  The elderly live on a fixed income, so the government has an obligation to keep inflation rates low. 
A)  The inflation rate is too high. 
B)  The government should worry less about inflation and more about unemployment. 
C)  If the government increases the rate of growth of the money supply, the inflation rate will increase, ceteris paribus. 
D)  The elderly live on a fixed income, so the government has an obligation to keep inflation rates low.

Question 16

Which of the following is NOT a characteristic or focus of microeconomics?

Accepted Answer

A)  normative analysis. 
B)  analysis of aggregate economic variables. 
C)  empirical analysis. 
D)  empirical analysis 
A)  normative analysis. 
B)  analysis of aggregate economic variables. 
C)  empirical analysis. 
D)  empirical analysis

Question 17

Incentives are

Accepted Answer

A)  potential rewards available if a particular activity is undertaken. 
B)  ineffective as a device to get people to behave in a certain fashion. 
C)  inappropriate ways to obtain a certain kind of behavior. 
D)  useless when people behave rationally. 
A)  potential rewards available if a particular activity is undertaken. 
B)  ineffective as a device to get people to behave in a certain fashion. 
C)  inappropriate ways to obtain a certain kind of behavior. 
D)  useless when people behave rationally.

Question 18

Economic models relate to

Accepted Answer

A)  people's choices. 
B)  how people think about something. 
C)  group opinions. 
D)  the reasons people give for donating to charity. 
A)  people's choices. 
B)  how people think about something. 
C)  group opinions. 
D)  the reasons people give for donating to charity.

Question 19

Which of the following is a normative statement?

Accepted Answer

A)  An increase in consumer income will lead to increased sales of beef. 
B)  A decrease in the rate of unemployment will lead to upward pressure on consumer prices. 
C)  An increase in the income tax will cause a greater reduction in savings than an increase in the sales tax. 
D)  An economy with high unemployment can be worse off than an economy with high inflation. 
A)  An increase in consumer income will lead to increased sales of beef. 
B)  A decrease in the rate of unemployment will lead to upward pressure on consumer prices. 
C)  An increase in the income tax will cause a greater reduction in savings than an increase in the sales tax. 
D)  An economy with high unemployment can be worse off than an economy with high inflation.

Question 20

Which of the following statements is a normative as opposed to a positive economic statement?

Accepted Answer

A)  Consumer spending generates more jobs. 
B)  If the price of gasoline goes up, people buy less. 
C)  Labor unions should be allowed to organize in every industry. 
D)  Government intervention in markets is common in many countries. 
A)  Consumer spending generates more jobs. 
B)  If the price of gasoline goes up, people buy less. 
C)  Labor unions should be allowed to organize in every industry. 
D)  Government intervention in markets is common in many countries.

Exam 1: The Nature of Economics

Which of the following topics is a macroeconomic subject?

Which of the following statements about economic models is true?

Shelley's grandmother gave her a sweater for her birthday, but Shelley wanted a DVD. This implies that

Which of the following would most likely NOT be taught in a microeconomics course?

Self-interest

Economists develop models to

One major assumption of economics is that people

People behave rationally when they

The President's statement that "to encourage economic growth, taxes should be cut,"

Economic models are used to

Which one of the following is an example of a normative statement?

Which of the following is a behavioral implication of bounded rationality?

The primary purpose of economics is to understand how people make

Normative economics involves

Which of the following statements is an example of positive economic analysis?

Which of the following is NOT a characteristic or focus of microeconomics?

Incentives are

Economic models relate to

Which of the following is a normative statement?

Which of the following statements is a normative as opposed to a positive economic statement?

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters