Question 1

Figure 2-8 
-Refer to Figure 2-8. To reach point L, the economy would have to

Accepted Answer

A)  acquire more resources or experience a technological advance.
B)  begin using its available resources more efficiently than it is currently using them.
C)  shift resources away from the production of nails and toward the production of hammers.
D)  None of the above are correct; the economy will never be able to reach point L.E) A) and C)
F) None of the above

Question 2

A normative economic statement such as "The minimum wage should be abolished"

Accepted Answer

A)  would likely be made by an economist acting as a scientist.
B)  would require values and data to be evaluated.
C)  would require data but not values to be evaluated.
D)  could not be evaluated by economists acting as policy advisers.E) A) and B)
F) B) and C)

Question 3

For economists, historical episodes

Accepted Answer

A)  are not worthy of study because they offer few insights into current economic events and problems.
B)  are not worthy of study because laboratory experiments provide more reliable data.
C)  are worthy of study because economists rely entirely on observation, rather than on theory.
D)  are worthy of study because they serve as valuable substitutes for laboratory experiments.E) A) and D)
F) C) and D)

Question 4

Normative statements are not

Accepted Answer

A)  descriptive.
B)  prescriptive.
C)  claims about how the world should be.
D)  made by economists speaking as policy advisers.E) A) and B)
F) A) and C)

Question 5

Which of the following is an example of a normative, as opposed to positive, statement?

Accepted Answer

A)  If the price of a product decreases, people's willingness to buy that product will increase.
B)  Reducing tax rates on the wealthy would benefit the nation.
C)  If the national saving rate were to increase, so would the rate of economic growth.
D)  The elimination of trade restrictions would increase an economy's standard of living.E) B) and D)
F) C) and D)

Question 6

"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

Accepted Answer

A)  normative economic statement.
B)  positive economic statement.
C)  statement made by an economist working as a scientist.
D)  judgment based on evaluation of evidence, not values.E) All of the above
F) A) and C)

Question 7

Economists make assumptions to

Accepted Answer

A)  mimic the methodologies employed by other scientists.
B)  minimize the number of experiments that yield no useful data.
C)  minimize the likelihood that some aspect of the problem at hand is being overlooked.
D)  focus their thinking on the essence of the problem at hand.E) A) and B)
F) A) and C)

Question 8

John Maynard Keynes believed the ideas of economists to be

Accepted Answer

A)  generally incorrect.
B)  powerful.
C)  academic and without practical application.
D)  rantings of madmen.E) A) and D)
F) B) and C)

Question 9

John Maynard Keynes referred to economics as an easy subject,

Accepted Answer

A)  at which very few excel.
B)  but not as easy as philosophy or the pure sciences.
C)  which very few can enjoy.
D)  which deals primarily with common sense.E) B) and C)
F) None of the above

Question 10

Which of the following areas of study typifies macroeconomics as opposed to microeconomics?

Accepted Answer

A)  the effects of rent control on the availability of housing in New York City
B)  the economic impact of tornadoes on cities and towns in Oklahoma
C)  how tariffs on shoes affects the shoe industry
D)  the effect on the economy of changes in the nation's unemployment rateE) A) and B)
F) A) and C)

Question 11

Economists at the U.S. Department of Justice help enforce the nation's antitrust laws.

Accepted Answer

A) True 
 B)False

Question 12

Figure 2-14 
-Refer to Figure 2-14. Points A, B, and D represent feasible outcomes for this economy.

Accepted Answer

A) True 
 B)False

Question 13

Economic models omit many details to allow us to see what is truly important.

Accepted Answer

A) True 
 B)False

Question 14

Figure 2-2 
-Refer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow diagram, then

Accepted Answer

A)  Box D must represent the markets for factors of production.
B)  Box C must represent the markets for goods and services.
C)  firms are buyers in the markets represented by Box D.
D)  All of the above are correct.E) B) and D)
F) None of the above

Question 15

The production possibilities frontier is used to illustrate some basic economic ideas, including

Accepted Answer

A)  scarcity.
B)  opportunity cost.
C)  economic growth.
D)  All of the above are correct.E) All of the above
F) C) and D)

Question 16

When economists make positive statements, they are

Accepted Answer

A)  speaking as scientists.
B)  speaking as policy advisers.
C)  making claims about how the world should be.
D)  revealing that they are very conservative in their views of how the world works.E) A) and C)
F) A) and B)

Question 17

One thing economists do to help them understand how the real world works is

Accepted Answer

A)  make assumptions.
B)  ignore the past.
C)  try to capture every aspect of the real world in the models they construct.
D)  All of the above are correct.E) A) and D)
F) B) and D)

Question 18

Figure 2-1 
-Refer to Figure 2-1. Which arrow represents the flow of goods and services?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and D)
F) None of the above

Question 19

Macroeconomics is the study of

Accepted Answer

A)  individual decision makers.
B)  international trade.
C)  economy-wide phenomena.
D)  markets for large products.E) None of the above
F) A) and D)

Question 20

Since 1946, the president of the United States has received guidance from a group comprised of three members and a staff of a few dozen economists known as the

Accepted Answer

Council of...

Exam 2: Thinking Like an Economist

For economists, historical episodes

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Figure 2-8 -Refer to Figure 2-8. To reach point L, the economy would have to

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Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of goods and services?

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One thing economists do to help them understand how the real world works is

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John Maynard Keynes referred to economics as an easy subject,

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Macroeconomics is the study of

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Normative statements are not

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Figure 2-2 -Refer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow diagram, then

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"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

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A normative economic statement such as "The minimum wage should be abolished"

Correct AnswerverifiedShow Answer

Since 1946, the president of the United States has received guidance from a group comprised of three members and a staff of a few dozen economists known as the

Correct AnswerverifiedCouncil of...View AnswerShow Answer

Which of the following is an example of a normative, as opposed to positive, statement?

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Economists make assumptions to

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Economic models omit many details to allow us to see what is truly important.

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John Maynard Keynes believed the ideas of economists to be

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Economists at the U.S. Department of Justice help enforce the nation's antitrust laws.

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The production possibilities frontier is used to illustrate some basic economic ideas, including

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Figure 2-14 -Refer to Figure 2-14. Points A, B, and D represent feasible outcomes for this economy.

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When economists make positive statements, they are

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Which of the following areas of study typifies macroeconomics as opposed to microeconomics?

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Council of...
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