Question 1

An example of a microeconomic decision is a situation in which

Accepted Answer

A)   the Federal Reserve considers how much to increase the money supply during the coming month in an effort to constrain the rate of inflation.
B)   Congress and the president seek to reach a compromise on how much to increase government spending in an effort to influence national expenditures.
C)   a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits.
D)   the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange rates with an aim to boosting demand for U.S. goods and services.

Question 2

Is inflation a macroeconomic or a microeconomic question? Why?

Accepted Answer

Inflation is a macroeconomic question be...

Question 3

A friend wants to learn how the unemployment rate is calculated and how inflation is measured. He asks you which economics course to take and you advise him to enroll in

Accepted Answer

A)   macroeconomics.
B)   microeconomics.
C)   either micro- or macroeconomics. They both concentrate equally on those issues.
D)   financial accounting because economics doesn't address those topics in its courses.

Question 4

Positive economic analysis is supposed to be

Accepted Answer

A)   true.
B)   free of value judgments.
C)   just and fair.
D)   moral and honest.

Question 5

________ are the things that are used to produce items that satisfy people's wants.

Accepted Answer

A)   Concepts
B)   Production possibilities curves
C)   Resources
D)   Costs

Question 6

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

Accepted Answer

A)   changes in the health care industry
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 7

An inverse relationship will be graphed as

Accepted Answer

A)   a line that is upward sloping.
B)   a line that is downward sloping.
C)   a loop.
D)   a U-shaped curve.

Question 8

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.

Question 9

Economics is the study of

Accepted Answer

A)   how to own as many resources as possible.
B)   ceteris paribus.
C)   the way people think rather than the way they act.
D)   how people allocate their limited resources to satisfy their unlimited wants.

Question 10

If two competing models are offered to explain a certain economic phenomenon, the better model is the one

Accepted Answer

A)   that is the newest since newer models are better than old models.
B)   with the fewest unrealistic assumptions.
C)   that more often predicts with most accuracy.
D)   that is not subject to empirical verification.

Question 11

Underlying economic theory is the idea that

Accepted Answer

A)   people respond only to negative incentives, not to positive ones.
B)   choices are affected by both positive and negative incentives.
C)   value judgments do not play a role in the economic decisions people make.
D)   money is the only incentive that matters.

Question 12

Economics is a part of the

Accepted Answer

A)   social sciences.
B)   natural sciences.
C)   biological sciences.
D)   organizational sciences.

Question 13

Economic models

Accepted Answer

A)   should be designed so as to capture every detail or interrelationship that exists.
B)   are simplified representations of the real world.
C)   must employ the use of laboratory methods.
D)   All of the above are correct.

Question 14

Which of the following would likely be considered as falling into the domain of microeconomics?

Accepted Answer

A)   the U.S. unemployment rate
B)   the Gross Domestic Product
C)   the price of apples
D)   the effects of fiscal policy on the U.S. economy

Question 15

The potential rewards that are available to an individual if a particular activity is undertaken are known as

Accepted Answer

A)   premiums.
B)   gifts.
C)   incentives.
D)   intrinsic values.

Question 16

The idea of bounded rationality is used to address all of the following characteristics EXCEPT

Accepted Answer

A)   unbounded selfishness.
B)   unbounded knowledge.
C)   unbounded willpower.
D)   unbounded rationality.

Question 17

Normative economic statements

Accepted Answer

A)   violate the law of ceteris paribus.
B)   contain value judgments.
C)   are usually irrational.
D)   are easily testable.

Question 18

"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.

Question 19

The usefulness of a model is determined by

Accepted Answer

A)   whether it helps to explain or predict real world phenomena.
B)   whether it possesses realistic assumptions.
C)   how well it uses the ceteris paribus assumption.
D)   how many of the possible relationships that exist are included in the model.

Question 20

A good economic model

Accepted Answer

A)   utilizes only the two most important factors to analyze the problem under consideration.
B)   generates statements that are incapable of refutation.
C)   represents every detail of the real world.
D)   yields usable predictions and implications for the real world.

Exam 1: The Nature of Economics

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

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Underlying economic theory is the idea that

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Is inflation a macroeconomic or a microeconomic question? Why?

Correct AnswerverifiedInflation is a macroeconomic question be...View AnswerShow Answer

The usefulness of a model is determined by

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The potential rewards that are available to an individual if a particular activity is undertaken are known as

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Economic models

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The idea of bounded rationality is used to address all of the following characteristics EXCEPT

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A good economic model

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If two competing models are offered to explain a certain economic phenomenon, the better model is the one

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A friend wants to learn how the unemployment rate is calculated and how inflation is measured. He asks you which economics course to take and you advise him to enroll in

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Which of the following would likely be considered as falling into the domain of microeconomics?

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An example of a microeconomic decision is a situation in which

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Economics is the study of

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________ are the things that are used to produce items that satisfy people's wants.

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

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Normative economic statements

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

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An inverse relationship will be graphed as

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Economics is a part of the

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Positive economic analysis is supposed to be

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Inflation is a macroeconomic question be...
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