Question 1

What is the type of economic system that relies on one central authority to make economic decisions?

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 2

Analysis that involves value judgments about economic policies is

Accepted Answer

A)  positive economics. 
B)  normative economics. 
C)  microeconomics. 
D)  macroeconomics. 
A)  positive economics. 
B)  normative economics. 
C)  microeconomics. 
D)  macroeconomics.

Question 3

What is meant by the term "incentives," and why are they important?

Accepted Answer

Incentives are rewards for engaging in p

Question 4

A positive economic statement is one that

Accepted Answer

A)  can be refuted. 
B)  is free of the ceteris paribus assumption. 
C)  is based on a value judgment. 
D)  asserts something about the role of moral behavior in building a strong economy. 
A)  can be refuted. 
B)  is free of the ceteris paribus assumption. 
C)  is based on a value judgment. 
D)  asserts something about the role of moral behavior in building a strong economy.

Question 5

The use of data in economic models is important because

Accepted Answer

A)  the model's predictive value rests on supportive evidence from real-world data. 
B)  the models are always complex in nature. 
C)  models must analyze every possible angle of the problem. 
D)  social problems analyzed by economists require long streams of data. 
A)  the model's predictive value rests on supportive evidence from real-world data. 
B)  the models are always complex in nature. 
C)  models must analyze every possible angle of the problem. 
D)  social problems analyzed by economists require long streams of data.

Question 6

Economics is called an empirical science because

Accepted Answer

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

Question 7

It has been noted that when the price of a good increases, people purchase less of the good. This is an example of

Accepted Answer

A)  macroeconomic analysis. 
B)  irrational behavior. 
C)  normative economic analysis. 
D)  positive economic analysis. 
A)  macroeconomic analysis. 
B)  irrational behavior. 
C)  normative economic analysis. 
D)  positive economic analysis.

Question 8

The headline in the local paper today is "College tuition next fall rise by 6 percent." This statement is an example of

Accepted Answer

A)  a normative statement. 
B)  a positive statement. 
C)  an invalid statement. 
D)  ceteris paribus. 
A)  a normative statement. 
B)  a positive statement. 
C)  an invalid statement. 
D)  ceteris paribus.

Question 9

In a market system, ________ provide signals about whether resources are relatively scarce or abundant.

Accepted Answer

A)  prices 
B)  buyers alone 
C)  government officials 
D)  scientists 
A)  prices 
B)  buyers alone 
C)  government officials 
D)  scientists

Question 10

Which of the following is a statement with positive economic analysis?

Accepted Answer

A)  Lower wages increase employment and reduce the unemployment rate. 
B)  Slower money growth reduces inflation. 
C)  A reduction in the size of the budget deficit will reduce interest rates. 
D)  all of the above 
A)  Lower wages increase employment and reduce the unemployment rate. 
B)  Slower money growth reduces inflation. 
C)  A reduction in the size of the budget deficit will reduce interest rates. 
D)  all of the above

Question 11

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 with a focus only 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 with a focus only on financial outcomes.

Question 12

Ceteris paribus means

Accepted Answer

A)  all men are created equal. 
B)  wage parity between men and women is a worthy goal. 
C)  there are an infinite number of factors affecting each human decision and they change all the time. 
D)  economists isolate one or two factors that change when analyzing human decisions. 
A)  all men are created equal. 
B)  wage parity between men and women is a worthy goal. 
C)  there are an infinite number of factors affecting each human decision and they change all the time. 
D)  economists isolate one or two factors that change when analyzing human decisions.

Question 13

Normative economics

Accepted Answer

A)  is never studied at the undergraduate level. 
B)  involves value judgments. 
C)  is always objective. 
D)  cannot be applied to all economic problems. 
A)  is never studied at the undergraduate level. 
B)  involves value judgments. 
C)  is always objective. 
D)  cannot be applied to all economic problems.

Question 14

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

Accepted Answer

A)  see whether it generates accurate predictions about the choices of business people. 
B)  ask business people whether it is true or not. 
C)  find out whether U.S. businesses are more profitable than European businesses. 
D)  take a survey of people and see if they agree with this assumption. 
A)  see whether it generates accurate predictions about the choices of business people. 
B)  ask business people whether it is true or not. 
C)  find out whether U.S. businesses are more profitable than European businesses. 
D)  take a survey of people and see if they agree with this assumption.

Question 15

Which of the following statements is a positive economic statement?

Accepted Answer

A)  The Congress should pass the president's tax package. 
B)  The U.S. tax system always gives too much favor to rich people. 
C)  The President's budget included an increase in unemployment insurance payments. 
D)  none of the above 
A)  The Congress should pass the president's tax package. 
B)  The U.S. tax system always gives too much favor to rich people. 
C)  The President's budget included an increase in unemployment insurance payments. 
D)  none of the above

Question 16

Macroeconomics is concerned with studying the

Accepted Answer

A)  behavior of individual decision makers. 
B)  performance of the economy as a whole. 
C)  prices of specific companies' stocks. 
D)  wants of individual consumers. 
A)  behavior of individual decision makers. 
B)  performance of the economy as a whole. 
C)  prices of specific companies' stocks. 
D)  wants of individual consumers.

Question 17

Ceteris paribus means

Accepted Answer

A)  making all the necessary changes. 
B)  other things constant. 
C)  the assumption of rational behavior 
D)  as realistic as it can be 
A)  making all the necessary changes. 
B)  other things constant. 
C)  the assumption of rational behavior 
D)  as realistic as it can be

Question 18

In economics, the word "aggregate" refers to

Accepted Answer

A)  the government. 
B)  how individual households differ from each other. 
C)  the public sector itself. 
D)  an economy as a whole. 
A)  the government. 
B)  how individual households differ from each other. 
C)  the public sector itself. 
D)  an economy as a whole.

Question 19

The impact of higher taxes would be examined by

Accepted Answer

A)  a microeconomist. 
B)  a macroeconomist. 
C)  both a macroeconomist and a microeconomist. 
D)  neither a macroeconomist nor a microeconomist. 
A)  a microeconomist. 
B)  a macroeconomist. 
C)  both a macroeconomist and a microeconomist. 
D)  neither a macroeconomist nor a microeconomist.

Question 20

"To be useful, a model must be completely realistic." Evaluate.

Accepted Answer

This statement is incorrect. To be usefu

Exam 1: The Nature of Economics

What is the type of economic system that relies on one central authority to make economic decisions?

Analysis that involves value judgments about economic policies is

What is meant by the term "incentives," and why are they important?

A positive economic statement is one that

The use of data in economic models is important because

Economics is called an empirical science because

It has been noted that when the price of a good increases, people purchase less of the good. This is an example of

The headline in the local paper today is "College tuition next fall rise by 6 percent." This statement is an example of

In a market system, ________ provide signals about whether resources are relatively scarce or abundant.

Which of the following is a statement with positive economic analysis?

People behave rationally when they

Ceteris paribus means

Normative economics

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

Which of the following statements is a positive economic statement?

Macroeconomics is concerned with studying the

Ceteris paribus means

In economics, the word "aggregate" refers to

The impact of higher taxes would be examined by

"To be useful, a model must be completely realistic." Evaluate.

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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