Question 1

What does it mean to say economics is an empirical science, and how is this related to the question of deciding on the usefulness of a model?

Accepted Answer

Economists examine evidence to test whet

Question 2

What is the purpose of knowing "the economic way of thinking"?

Accepted Answer

The economic way of thinking provides a

Question 3

Which of the following statements concerning economic models is FALSE?

Accepted Answer

A)  Economic models must provide usable predictions. 
B)  Economic models are based on pure fact and no assumptions. 
C)  Economic models are tested empirically. 
D)  Economic models relate to how people behave. 
A)  Economic models must provide usable predictions. 
B)  Economic models are based on pure fact and no assumptions. 
C)  Economic models are tested empirically. 
D)  Economic models relate to how people behave.

Question 4

Economics is best defined as the

Accepted Answer

A)  study of how people make choices to satisfy their wants. 
B)  study of individual self-interests. 
C)  study of how government can most efficiently raise funds by taxation. 
D)  process by which goods are sold in free markets. 
A)  study of how people make choices to satisfy their wants. 
B)  study of individual self-interests. 
C)  study of how government can most efficiently raise funds by taxation. 
D)  process by which goods are sold in free markets.

Question 5

Economic models are

Accepted Answer

A)  always based on laboratory methods similar to natural sciences. 
B)  a simplified representations of the real world. 
C)  used only in microeconomic analysis by households. 
D)  used only in macroeconomic analysis by business firms. 
A)  always based on laboratory methods similar to natural sciences. 
B)  a simplified representations of the real world. 
C)  used only in microeconomic analysis by households. 
D)  used only in macroeconomic analysis by business firms.

Question 6

Macroeconomics would be concerned with

Accepted Answer

A)  implications of changes in unemployment and inflation. 
B)  the effects on individual consumers of changes in the price of gasoline for a business. 
C)  the effects of a tax on beer. 
D)  the effects of wage increases on steel manufacturers. 
A)  implications of changes in unemployment and inflation. 
B)  the effects on individual consumers of changes in the price of gasoline for a business. 
C)  the effects of a tax on beer. 
D)  the effects of wage increases on steel manufacturers.

Question 7

Microeconomics examines the

Accepted Answer

A)  total household expenditures. 
B)  behavior of the economy as a whole. 
C)  aggregate business spending. 
D)  decision making undertaken by individual households. 
A)  total household expenditures. 
B)  behavior of the economy as a whole. 
C)  aggregate business spending. 
D)  decision making undertaken by individual households.

Question 8

Macroeconomics often relies on microeconomic analysis because

Accepted Answer

A)  microeconomics is older than macroeconomics. 
B)  microeconomic theory can be tested and macroeconomic theory cannot be tested. 
C)  all aggregates are made up of individuals and firms. 
D)  the effects of macroeconomic subjects such as inflation and unemployment are independent of individual consumers and firms. 
A)  microeconomics is older than macroeconomics. 
B)  microeconomic theory can be tested and macroeconomic theory cannot be tested. 
C)  all aggregates are made up of individuals and firms. 
D)  the effects of macroeconomic subjects such as inflation and unemployment are independent of individual consumers and firms.

Question 9

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

Accepted Answer

A)  Lower income tax rates will generate greater income tax revenue to the government. 
B)  Income tax rates should be lower because that will increase government revenue. 
C)  Lower income tax rates yield a larger federal government deficit. 
D)  The federal budget deficit has increased every year for the last twenty years. 
A)  Lower income tax rates will generate greater income tax revenue to the government. 
B)  Income tax rates should be lower because that will increase government revenue. 
C)  Lower income tax rates yield a larger federal government deficit. 
D)  The federal budget deficit has increased every year for the last twenty years.

Question 10

Which of the following is a microeconomic topic?

Accepted Answer

A)  the unemployment rate of the United States economy as a whole 
B)  the rate at which prices increase in Brazil 
C)  the advertising strategy of a particular company 
D)  the increase in the national income of the United States over the past three months 
A)  the unemployment rate of the United States economy as a whole 
B)  the rate at which prices increase in Brazil 
C)  the advertising strategy of a particular company 
D)  the increase in the national income of the United States over the past three months

Question 11

Which of the following is a normative economic statement?

Accepted Answer

A)  If the government increases spending, unemployment will fall. 
B)  The government should increase spending during times of economic recession. 
C)  If banks create more money, unemployment will decrease. 
D)  If the price of gasoline rises, car pooling will increase. 
A)  If the government increases spending, unemployment will fall. 
B)  The government should increase spending during times of economic recession. 
C)  If banks create more money, unemployment will decrease. 
D)  If the price of gasoline rises, car pooling will increase.

Question 12

Central planning is a key characteristic of which economic system?

Accepted Answer

A)  Free market 
B)  Price system 
C)  Command and control 
D)  Mixed economic system 
A)  Free market 
B)  Price system 
C)  Command and control 
D)  Mixed economic system

Question 13

Ceteris paribus means

Accepted Answer

A)  making all the necessary changes. 
B)  other things constant. 
C)  for certain parameters. 
D)  let the buyer beware. 
A)  making all the necessary changes. 
B)  other things constant. 
C)  for certain parameters. 
D)  let the buyer beware.

Question 14

How does the science of economics deal with the fact that we all have different values?

Accepted Answer

A)  by assuming that values don't play a role in economic behavior 
B)  by seeking to discover the sources of different value systems 
C)  by using positive analysis 
D)  by surveying the public to see what the most common values are, and then incorporating those as assumptions into their models 
A)  by assuming that values don't play a role in economic behavior 
B)  by seeking to discover the sources of different value systems 
C)  by using positive analysis 
D)  by surveying the public to see what the most common values are, and then incorporating those as assumptions into their models

Question 15

What is the type of mechanism that answers the basic economic questions through a decentralized decision making process?

Accepted Answer

A)  Market system 
B)  Dictatorship 
C)  Command and control 
D)  Mixed economic system 
A)  Market system 
B)  Dictatorship 
C)  Command and control 
D)  Mixed economic system

Question 16

Microeconomics studies

Accepted Answer

A)  decisions made by individual consumers and firms. 
B)  the changes in economic theory brought about by real-world events. 
C)  how small changes in the unemployment rate can have far-reaching effects. 
D)  how small changes in the money supply can have far-reaching effects. 
A)  decisions made by individual consumers and firms. 
B)  the changes in economic theory brought about by real-world events. 
C)  how small changes in the unemployment rate can have far-reaching effects. 
D)  how small changes in the money supply can have far-reaching effects.

Question 17

A direct relationship occurs when

Accepted Answer

A)  the two variables being compared change in opposite directions, or when one goes up the other goes down. 
B)  a change in one of the variables causes a change in the other variable in any direction. 
C)  the two variables being compared change in the same direction, or when one goes up the other also goes up. 
D)  the two variables have no identifiable relationship with each other. 
A)  the two variables being compared change in opposite directions, or when one goes up the other goes down. 
B)  a change in one of the variables causes a change in the other variable in any direction. 
C)  the two variables being compared change in the same direction, or when one goes up the other also goes up. 
D)  the two variables have no identifiable relationship with each other.

Question 18

Which of the following is a microeconomic concern?

Accepted Answer

A)  the rate of economic growth in the United States 
B)  the current unemployment rate in the United States 
C)  consumer behavior 
D)  national output of the United States 
A)  the rate of economic growth in the United States 
B)  the current unemployment rate in the United States 
C)  consumer behavior 
D)  national output of the United States

Question 19

John has an economics test tomorrow. He must study and has planned the rest of his day so that he can fit some study time in. He has decided to go to the gym and then study for several hours. Which of the following statements is true?

Accepted Answer

A)  John did not use the economic way of thinking because his decision on how to allocate his time did not involve money. 
B)  John's decision on how to allocate his time is inconsistent with the rationality assumption since he has decided to go to the gym. 
C)  John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off. 
D)  John's decision does not involve his pursuit of self-interest. 
A)  John did not use the economic way of thinking because his decision on how to allocate his time did not involve money. 
B)  John's decision on how to allocate his time is inconsistent with the rationality assumption since he has decided to go to the gym. 
C)  John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off. 
D)  John's decision does not involve his pursuit of self-interest.

Question 20

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.

Exam 1: The Nature of Economics

What does it mean to say economics is an empirical science, and how is this related to the question of deciding on the usefulness of a model?

What is the purpose of knowing "the economic way of thinking"?

Which of the following statements concerning economic models is FALSE?

Economics is best defined as the

Economic models are

Macroeconomics would be concerned with

Microeconomics examines the

Macroeconomics often relies on microeconomic analysis because

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

Which of the following is a microeconomic topic?

Which of the following is a normative economic statement?

Central planning is a key characteristic of which economic system?

Ceteris paribus means

How does the science of economics deal with the fact that we all have different values?

What is the type of mechanism that answers the basic economic questions through a decentralized decision making process?

Microeconomics studies

A direct relationship occurs when

Which of the following is a microeconomic concern?

John has an economics test tomorrow. He must study and has planned the rest of his day so that he can fit some study time in. He has decided to go to the gym and then study for several hours. Which of the following statements is true?

Economics is called an empirical science because

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

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