Question 1

The President receives economic policy advice from economists at each of the following except

Accepted Answer

A)   the Council of Economic Advisors.
B)   the Department of the Treasury.
C)   the Congressional Budget office.
D)   the Department of Labor.E) All of the above
F) B) and C)

Question 2

Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik

Accepted Answer

A)   hold different normative views about the tax system.
B)   disagree about the validity of a positive theory.
C)   have a fundamental misunderstanding of the tax system.
D)   More than one of the above is correct.E) None of the above
F) All of the above

Question 3

The production possibilities frontier provides an illustration of the principle that

Accepted Answer

A)   trade can make everyone better off.
B)   governments can sometimes improve market outcomes.
C)   people face trade-offs.
D)   people respond to incentives.E) B) and C)
F) All of the above

Question 4

The scientific method is the dispassionate development and testing of theories about how the world works.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not an example of a positive, as opposed to normative, statement?

Accepted Answer

A)   Higher gasoline prices will reduce gasoline consumption.
B)   Equality is more important than efficiency.
C)   Trade restrictions lower our standard of living.
D)   If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money.E) A) and B)
F) All of the above

Question 6

Figure 2-1 
-Refer to Figure 2-1. Which arrow represents the flow of income payments?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) B) and D)
F) B) and C)

Question 7

Is the following a positive or normative statement? The United States government should mandate that every citizen purchases health insurance.

Accepted Answer

The answer of Is the following a positive or normative...

Question 8

Figure 2-1 
-Refer to Figure 2-1. Which arrow represents the flow of spending by households?

Accepted Answer

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

Question 9

"Other things equal, an increase in supply causes a decrease in price" is a normative statement, not a positive statement.

Accepted Answer

A) True 
 B)False

Question 10

Figure 2-21 
-Refer to Figure 2-21. According to the graph, snowstorms

Accepted Answer

A)   and snowblowers sold are positively correlated.
B)   and snowblowers sold are negatively correlated
C)   and snowblowers sold are uncorrelated.
D)   are caused by more snowblowers being sold.E) C) and D)
F) A) and D)

Question 11

Figure 2-18
Relationship between Price and Restaurant Meals 
-Refer to Figure 2-18. A movement from point A to point Z is called

Accepted Answer

A)   a shift in demand.
B)   a movement along the demand curve.
C)   a shift in supply.
D)   a movement along the supply curve.E) B) and C)
F) C) and D)

Question 12

Economists who are primarily responsible for advising Congress on economic matters work in which agency?

Accepted Answer

A)   the Federal Reserve
B)   the Congressional Budget Office
C)   the Department of the Treasury
D)   the Department of CommerceE) A) and B)
F) A) and C)

Question 13

Policymaking in a representative democracy

Accepted Answer

A)   is straightforward and does not involve any disagreement.
B)   benefits from the input of economists, even if their advice is not always followed.
C)   is conducted without the input of economists.
D)   is always based exclusively on the results of economic analysis.E) None of the above
F) B) and D)

Question 14

When two variables have a negative correlation,

Accepted Answer

A)   they tend to move in opposite directions.
B)   they tend to move in the same direction.
C)   one variable will move while the other remains constant.
D)   the variables' values are never positive.E) All of the above
F) None of the above

Question 15

On a bowed production possibilities frontier, as you move down along the curve

Accepted Answer

A)   more of one good must be given up to receive one unit of the other good.
B)   the available production technology does not change.
C)   the opportunity cost increases.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 16

Graphs such as bar graphs and pie charts are limited in that they

Accepted Answer

A)   can only show variables that are positively related.
B)   can only show variables that have a negative correlation.
C)   provide information on only one variable.
D)   provide information on no more than two variables.E) All of the above
F) A) and B)

Question 17

Which markets are represented in the simple circular-flow diagram?

Accepted Answer

A)   markets for goods and services and markets for financial assets
B)   markets for factors of production and markets for financial assets
C)   markets for goods and services and markets for factors of production
D)   markets for goods and services and markets for imports and exportsE) A) and B)
F) A) and C)

Question 18

In the markets for the factors of production in the circular-flow diagram,

Accepted Answer

A)   households are sellers and firms are buyers.
B)   households are buyers and firms are sellers.
C)   households and firms are both buyers.
D)   households and firms are both sellers.E) A) and B)
F) None of the above

Question 19

A demand curve shows the relationship

Accepted Answer

A)   between income and quantity demanded.
B)   between price and income.
C)   between price and quantity demanded.
D)   among income, price, and quantity demanded.E) A) and C)
F) None of the above

Question 20

Figure 2-8 
-Refer to Figure 2-8. Efficient production is represented by which points) ?

Accepted Answer

A)   J
B)   J, K
C)   J, K, L
D)   J, K, ME) C) and D)
F) B) and D)

Exam 2: Thinking Like an Economist

Economists who are primarily responsible for advising Congress on economic matters work in which agency?

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Figure 2-8 -Refer to Figure 2-8. Efficient production is represented by which points) ?

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The President receives economic policy advice from economists at each of the following except

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Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of income payments?

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When two variables have a negative correlation,

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Is the following a positive or normative statement? The United States government should mandate that every citizen purchases health insurance.

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Which markets are represented in the simple circular-flow diagram?

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Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik

Correct AnswerverifiedShow Answer

The scientific method is the dispassionate development and testing of theories about how the world works.

Correct AnswerverifiedShow Answer

In the markets for the factors of production in the circular-flow diagram,

Correct AnswerverifiedShow Answer

"Other things equal, an increase in supply causes a decrease in price" is a normative statement, not a positive statement.

Correct AnswerverifiedShow Answer

Figure 2-21 -Refer to Figure 2-21. According to the graph, snowstorms

Correct AnswerverifiedShow Answer

On a bowed production possibilities frontier, as you move down along the curve

Correct AnswerverifiedShow Answer

Graphs such as bar graphs and pie charts are limited in that they

Correct AnswerverifiedShow Answer

Policymaking in a representative democracy

Correct AnswerverifiedShow Answer

The production possibilities frontier provides an illustration of the principle that

Correct AnswerverifiedShow Answer

Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of spending by households?

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Which of the following is not an example of a positive, as opposed to normative, statement?

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A demand curve shows the relationship

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Figure 2-18 Relationship between Price and Restaurant Meals -Refer to Figure 2-18. A movement from point A to point Z is called

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