Question 1

A decision made by a rational person

Accepted Answer

A)  is intended to make the person worse off. 
B)  would always make the person wealthier. 
C)  is identical to a decision that would be made by any other person facing the same choices. 
D)  is intended to make the person better off. 
A)  is intended to make the person worse off. 
B)  would always make the person wealthier. 
C)  is identical to a decision that would be made by any other person facing the same choices. 
D)  is intended to make the person better off. D

Question 2

Because models are used to explain economic behavior

Accepted Answer

A)  the assumptions must be complex while the models themselves are simple. 
B)  models must be complex. 
C)  models must be simple. 
D)  models can be either simple or complex so long as it explains economic behavior. 
A)  the assumptions must be complex while the models themselves are simple. 
B)  models must be complex. 
C)  models must be simple. 
D)  models can be either simple or complex so long as it explains economic behavior. D

Question 3

Which of the following is a positive economic statement?

Accepted Answer

A)  Policymakers should strive to eliminate government budget deficits. 
B)  The President of the United States should promote high employment growth in the United States. 
C)  If the price of eggs increases, the quantity demanded of eggs will fall. 
D)  We should try to eliminate poverty in the United States. 
A)  Policymakers should strive to eliminate government budget deficits. 
B)  The President of the United States should promote high employment growth in the United States. 
C)  If the price of eggs increases, the quantity demanded of eggs will fall. 
D)  We should try to eliminate poverty in the United States. C

Question 4

A mixed economic system is best described as an economy with a mix of

Accepted Answer

A)  state and federal governments. 
B)  domestic and foreign firms. 
C)  free markets and government control. 
D)  for-profit organizations and not-for-profit organizations. 
A)  state and federal governments. 
B)  domestic and foreign firms. 
C)  free markets and government control. 
D)  for-profit organizations and not-for-profit organizations.

Question 5

Economics is the study of how

Accepted Answer

A)  people become selfish. 
B)  preferences are determined. 
C)  psychology influences preferences. 
D)  people make choices. 
A)  people become selfish. 
B)  preferences are determined. 
C)  psychology influences preferences. 
D)  people make choices.

Question 6

Economic models are NOT used to

Accepted Answer

A)  explain economic phenomena. 
B)  predict economic phenomena. 
C)  understand economic phenomena. 
D)  describe all economic phenomena in finest detail. 
A)  explain economic phenomena. 
B)  predict economic phenomena. 
C)  understand economic phenomena. 
D)  describe all economic phenomena in finest detail.

Question 7

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals

Accepted Answer

A)  always tend to act in an altruistic manner. 
B)  always consider the impact of their actions on the welfare of others. 
C)  are motivated by self-interest. 
D)  are never concerned with economic issues. 
A)  always tend to act in an altruistic manner. 
B)  always consider the impact of their actions on the welfare of others. 
C)  are motivated by self-interest. 
D)  are never concerned with economic issues.

Question 8

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

Question 9

Economic analysis is used

Accepted Answer

A)  only by instructors and students in economics to understand the world. 
B)  only by business people to raise profits. 
C)  only by policy makers to make policy decisions. 
D)  in all decision making. 
A)  only by instructors and students in economics to understand the world. 
B)  only by business people to raise profits. 
C)  only by policy makers to make policy decisions. 
D)  in all decision making.

Question 10

The assumption that people do NOT intentionally make decisions that would leave them worse off is known as

Accepted Answer

A)  the rationality assumption. 
B)  the false assumption. 
C)  the ceteris paribus assumption. 
D)  the normative assumption. 
A)  the rationality assumption. 
B)  the false assumption. 
C)  the ceteris paribus assumption. 
D)  the normative assumption.

Question 11

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

Accepted Answer

A)  psychology 
B)  sociology 
C)  political science 
D)  economics 
A)  psychology 
B)  sociology 
C)  political science 
D)  economics

Question 12

Economics is an empirical science, which means that economists

Accepted Answer

A)  look at evidence to see whether or not the model is applicable. 
B)  test their models by utilizing unknown variables. 
C)  do only laboratory experiments. 
D)  refuse to test their models since the usefulness of a model is determined by whether it is logical or not. 
A)  look at evidence to see whether or not the model is applicable. 
B)  test their models by utilizing unknown variables. 
C)  do only laboratory experiments. 
D)  refuse to test their models since the usefulness of a model is determined by whether it is logical or not.

Question 13

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

Accepted Answer

A)  price changes in the world's oil markets 
B)  factors leading to different economic growth rates among countries 
C)  government actions in response to a slowdown in the economy 
D)  the relationship between the inflation rate and the unemployment rate 
A)  price changes in the world's oil markets 
B)  factors leading to different economic growth rates among countries 
C)  government actions in response to a slowdown in the economy 
D)  the relationship between the inflation rate and the unemployment rate

Question 14

A good economic model

Accepted Answer

A)  cannot be refuted. 
B)  describes the real world completely and in detail. 
C)  captures the essential relationships of the problem under consideration. 
D)  captures all relationships about the problem under consideration. 
A)  cannot be refuted. 
B)  describes the real world completely and in detail. 
C)  captures the essential relationships of the problem under consideration. 
D)  captures all relationships about the problem under consideration.

Question 15

Which of the following is a positive statement?

Accepted Answer

A)  We need to carefully protect our borders. 
B)  Inflation is the most damaging thing that can occur in an economy. 
C)  When tax revenues are less than government spending there is a budget deficit. 
D)  Foreign aid should be reduced to help reduce the national debt. 
A)  We need to carefully protect our borders. 
B)  Inflation is the most damaging thing that can occur in an economy. 
C)  When tax revenues are less than government spending there is a budget deficit. 
D)  Foreign aid should be reduced to help reduce the national debt.

Question 16

A theory or a model

Accepted Answer

A)  is a simplified, abstract view of reality. 
B)  is based on each economist's value judgments. 
C)  is a detailed analysis of what ought to be. 
D)  captures all aspects of the real world. 
A)  is a simplified, abstract view of reality. 
B)  is based on each economist's value judgments. 
C)  is a detailed analysis of what ought to be. 
D)  captures all aspects of the real world.

Question 17

According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by

Accepted Answer

A)  using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. 
B)  using the ceteris paribus assumption to assist in simplifying and examining each of the possible options. 
C)  utilizing readily available empirical evidence to assist in evaluating every option. 
D)  assessing every available choice by developing sophisticated theories regarding each option. 
A)  using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. 
B)  using the ceteris paribus assumption to assist in simplifying and examining each of the possible options. 
C)  utilizing readily available empirical evidence to assist in evaluating every option. 
D)  assessing every available choice by developing sophisticated theories regarding each option.

Question 18

Behavioral economics deals with

Accepted Answer

A)  the assumption that people are always selfish. 
B)  bounded rationality. 
C)  unbounded willpower. 
D)  only theories without justification from empirical evidence. 
A)  the assumption that people are always selfish. 
B)  bounded rationality. 
C)  unbounded willpower. 
D)  only theories without justification from empirical evidence.

Question 19

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 20

"Ceteris paribus" assumption means

Accepted Answer

A)  the role of rational self-interest in the economy. 
B)  that nothing else changes except the variables under consideration. 
C)  relying on real-world data in evaluating the usefulness of a model. 
D)  analysis that is strictly limited to making purely positive statements. 
A)  the role of rational self-interest in the economy. 
B)  that nothing else changes except the variables under consideration. 
C)  relying on real-world data in evaluating the usefulness of a model. 
D)  analysis that is strictly limited to making purely positive statements.

Exam 1: The Nature of Economics

A decision made by a rational person

Because models are used to explain economic behavior

Which of the following is a positive economic statement?

A mixed economic system is best described as an economy with a mix of

Economics is the study of how

Economic models are NOT used to

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals

Macroeconomics deals with ________ while microeconomics deals with ________.

Economic analysis is used

The assumption that people do NOT intentionally make decisions that would leave them worse off is known as

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

Economics is an empirical science, which means that economists

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

A good economic model

Which of the following is a positive statement?

A theory or a model

According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by

Behavioral economics deals with

Economics is the study of

"Ceteris paribus" assumption means

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

Macroeconomics deals with while microeconomics deals with .