Question 1

Ceteris paribus means

Accepted Answer

A)  other variables are held constant. 
B)  almost certainly. 
C)  only if everything works just right. 
D)  perhaps. 
A)  other variables are held constant. 
B)  almost certainly. 
C)  only if everything works just right. 
D)  perhaps.

Question 2

The primary objective of economics is

Accepted Answer

A)  to learn how to create more resources. 
B)  to study how people make choices with limited resources. 
C)  to learn how to make the most profits with a given amount of resources. 
D)  to study why some people are never happy with the resources they have. 
A)  to learn how to create more resources. 
B)  to study how people make choices with limited resources. 
C)  to learn how to make the most profits with a given amount of resources. 
D)  to study why some people are never happy with the resources they have.

Question 3

Which statement most accurately describes 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 social 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 social values a society should choose. 
D)  Economics is the study of how to eliminate scarcity.

Question 4

Models must

Accepted Answer

A)  be able to yield useable predictions. 
B)  be totally realistic in every detail. 
C)  be a complete reproduction of the real world. 
D)  include every relationship that exists. 
A)  be able to yield useable predictions. 
B)  be totally realistic in every detail. 
C)  be a complete reproduction of the real world. 
D)  include every relationship that exists.

Question 5

The slope of a line is the

Accepted Answer

A)  change in the values along the x-axis divided by the change in the values along the y-axis. 
B)  values on the x-axis divided by the values on the y-axis. 
C)  change in the values along the y-axis divided by the change in the values along the x-axis. 
D)  values on the y-axis divided by the values on the x-axis. 
A)  change in the values along the x-axis divided by the change in the values along the y-axis. 
B)  values on the x-axis divided by the values on the y-axis. 
C)  change in the values along the y-axis divided by the change in the values along the x-axis. 
D)  values on the y-axis divided by the values on the x-axis.

Question 6

A map is an example of a model because a map

Accepted Answer

A)  realistically describes an area. 
B)  is always as complex as space will permit. 
C)  is two-dimensional. 
D)  is a simplified representation of reality. 
A)  realistically describes an area. 
B)  is always as complex as space will permit. 
C)  is two-dimensional. 
D)  is a simplified representation of reality.

Question 7

The ceteris paribus assumption is important in economics because

Accepted Answer

A)  all empirical data are equal. 
B)  it would be impossible to relate the changes in one variable to another variable without holding other variables constant. 
C)  economic data move very slowly over time and so they can always be considered constant. 
D)  models are always complex and require as many variables as possible. 
A)  all empirical data are equal. 
B)  it would be impossible to relate the changes in one variable to another variable without holding other variables constant. 
C)  economic data move very slowly over time and so they can always be considered constant. 
D)  models are always complex and require as many variables as possible.

Question 8

Normative economic statements

Accepted Answer

A)  are statements of "what ought to be." 
B)  are statements of "what is." 
C)  are statements that may be tested by referring to facts and data. 
D)  do not involve value judgments. 
A)  are statements of "what ought to be." 
B)  are statements of "what is." 
C)  are statements that may be tested by referring to facts and data. 
D)  do not involve value judgments.

Question 9

Macroeconomics is concerned primarily with

Accepted Answer

A)  large firms or multinational corporations. 
B)  production and prices in particular markets. 
C)  aggregate economic variables. 
D)  normative issues. 
A)  large firms or multinational corporations. 
B)  production and prices in particular markets. 
C)  aggregate economic variables. 
D)  normative issues.

Question 10

To be useful, a model must

Accepted Answer

A)  predict accurately all of the time. 
B)  predict more accurately than other models that have been developed. 
C)  have assumptions that have been verified by empirical testing. 
D)  predict the behavior of every individual. 
A)  predict accurately all of the time. 
B)  predict more accurately than other models that have been developed. 
C)  have assumptions that have been verified by empirical testing. 
D)  predict the behavior of every individual.

Question 11

Which of the following statements is FALSE?

Accepted Answer

A)  Economists empirically test their models. 
B)  Economic models are not used to make predictions. 
C)  An economic model should capture only the key relationships that are sufficient to analyze the particular problem being studied. 
D)  Economic models relate to behavior rather than to individual thought processes. 
A)  Economists empirically test their models. 
B)  Economic models are not used to make predictions. 
C)  An economic model should capture only the key relationships that are sufficient to analyze the particular problem being studied. 
D)  Economic models relate to behavior rather than to individual thought processes.

Question 12

Economic theory predicts that people make choices in a manner that

Accepted Answer

A)  makes them well liked by others. 
B)  makes them better off. 
C)  reflects the fact that resources are unlimited. 
D)  shows that they do not respond to monetary incentives. 
A)  makes them well liked by others. 
B)  makes them better off. 
C)  reflects the fact that resources are unlimited. 
D)  shows that they do not respond to monetary incentives.

Question 13

Which of the following statements is NOT true?

Accepted Answer

A)  Economics is a social science. 
B)  Economics is an empirical science. 
C)  Economics does not use theories. 
D)  Economics is the study of how people allocate their limited resources to satisfy their unlimited wants. 
A)  Economics is a social science. 
B)  Economics is an empirical science. 
C)  Economics does not use theories. 
D)  Economics is the study of how people allocate their limited resources to satisfy their unlimited wants.

Question 14

Which of the following statements is TRUE?

Accepted Answer

A)  No economic model captures every detail that affects a problem. 
B)  Economic models always make accurate predictions about behaviors. 
C)  Economic models must fully reflect reality. 
D)  Economic models use economists' opinions with no use of data. 
A)  No economic model captures every detail that affects a problem. 
B)  Economic models always make accurate predictions about behaviors. 
C)  Economic models must fully reflect reality. 
D)  Economic models use economists' opinions with no use of data.

Question 15

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 16

"The U.S. government should not use my tax dollars to subsidize people on welfare"

Accepted Answer

A)  is a positive economic statement because it simply describes one person's opinion. 
B)  is a normative economic statement because it involves a value judgment about an economic policy. 
C)  is a positive economic statement because it predicts that my tax dollars will go to welfare. 
D)  is a normative economic statement because it is a scientific fact. 
A)  is a positive economic statement because it simply describes one person's opinion. 
B)  is a normative economic statement because it involves a value judgment about an economic policy. 
C)  is a positive economic statement because it predicts that my tax dollars will go to welfare. 
D)  is a normative economic statement because it is a scientific fact.

Question 17

What is economics and what does it try to explain?

Accepted Answer

Economics is the study of how people all

Question 18

The idea that people will not consciously make decisions that make them worse off is known as

Accepted Answer

A)  rationality assumption. 
B)  the decision duality. 
C)  Adam Smith's doctrine. 
D)  incentive assumption. 
A)  rationality assumption. 
B)  the decision duality. 
C)  Adam Smith's doctrine. 
D)  incentive assumption.

Question 19

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 20

Distinguish between a command-and-control economic system and a price system.

Accepted Answer

In a command-and-control economic system

Exam 1: The Nature of Economics

Ceteris paribus means

The primary objective of economics is

Which statement most accurately describes economics?

Models must

The slope of a line is the

A map is an example of a model because a map

The ceteris paribus assumption is important in economics because

Normative economic statements

Macroeconomics is concerned primarily with

To be useful, a model must

Which of the following statements is FALSE?

Economic theory predicts that people make choices in a manner that

Which of the following statements is NOT true?

Which of the following statements is TRUE?

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

"The U.S. government should not use my tax dollars to subsidize people on welfare"

What is economics and what does it try to explain?

The idea that people will not consciously make decisions that make them worse off is known as

Which of the following is a normative economic statement?

Distinguish between a command-and-control economic system and a price system.

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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