Question 1

Suppose that the Council of Economic Advisers tells the President that "the unemployment rate is 4 percent." The President responds,"That rate is still too high." The President's statement is

Accepted Answer

A)   a normative statement
B)   a positive statement
C)   empirically verifiable by checking economic data
D)   an indisputable statistical fact
E)   an incorrect positive statementF) B) and C)
G) B) and E)

Question 2

Which of the following is most closely associated with positive economics?

Accepted Answer

A)   determining the impact of government spending on the actual level of total employment
B)   determining the best level of immigration into the country
C)   determining whether too many luxury goods are being produced
D)   determining whether the government should reduce poverty
E)   determining whether the government should alter income taxes in order to increase total employmentF) C) and D)
G) All of the above

Question 3

Understanding the distinction between positive and normative economic statements is important because it

Accepted Answer

A)   enables us to derive better forecasts of macroeconomic aggregates such as GDP
B)   explains why economics is not a physical science
C)   is the primary distinction between macroeconomics and microeconomics
D)   provides a framework for understanding differences among economists
E)   enables us to see the rationale behind economic modelsF) B) and E)
G) All of the above

Question 4

The study of how firms interact in a market is a

Accepted Answer

A)   waste of time
B)   normative subject
C)   microeconomic topic
D)   topic in political science
E)   macroeconomic topicF) A) and E)
G) D) and E)

Question 5

Society as a whole faces opportunity costs because

Accepted Answer

A)   there is not enough money to go around
B)   politicians are greedy
C)   workers shirk their responsibilities and management is unable to compensate for this
D)   resources are abundant
E)   resources are scarceF) C) and D)
G) A) and E)

Question 6

Microeconomics is the branch of economics that concerns

Accepted Answer

A)   the overall health of the economy
B)   the behavior of individual households,firms,and governments
C)   the overall level of trade between nations
D)   local governments only
E)   the general level of outputF) All of the above
G) A) and B)

Question 7

Positive economics deals with

Accepted Answer

A)   theories about improving people's self-esteem
B)   practical ways of improving people's self-esteem by making money
C)   opinions that affirm economists' theories
D)   statements about the way things ought to be
E)   statements of factF) A) and B)
G) A) and C)

Question 8

The Congressional Budget Office and the Office of Management and Budget each produce deficit forecasts for a fiscal year.They use models that are mostly similar but have notable differences.As such,the disagreements are likely usually over

Accepted Answer

A)   normative issues
B)   positive issues
C)   the mathematical calculations in an economic model
D)   whether microeconomics or macroeconomics is more important
E)   whether economic theory is useful in explaining the behavior of actors in the economyF) None of the above
G) A) and B)

Question 9

A critical assumption

Accepted Answer

A)   makes an economic model a more concrete representation of reality
B)   eliminates unnecessary details from an economic model
C)   has an important impact on the conclusions of an economic model
D)   is usually implicit in an economic model
E)   increases the level of abstraction of an economic modelF) A) and D)
G) A) and E)

Question 10

The statement that "IBM's stock closed at $85" is

Accepted Answer

A)   a normative statement
B)   a positive statement
C)   a macroeconomic observation
D)   financial manipulation
E)   a sign that the market may be undervaluedF) B) and C)
G) A) and E)

Question 11

The unemployment rate for the economy as a whole is a(n)

Accepted Answer

A)   normative value judgment
B)   positive value judgment
C)   microeconomic statistic
D)   macroeconomic statistic
E)   example of an economic modelF) A) and B)
G) C) and D)

Question 12

Because resources are scarce,if society produces more of one commodity,it has to sacrifice some amount of another commodity.The amount sacrificed is

Accepted Answer

A)   a normative problem
B)   the out-of-pocket cost
C)   the opportunity cost
D)   the lost profit
E)   the total factor productivityF) B) and C)
G) A) and E)

Question 13

Macroeconomics is the branch of economics that concerns

Accepted Answer

A)   the behavior of individual actors in the economy
B)   output in a specific industry
C)   the overall health of the economy
D)   the federal government only
E)   prices in a specific industryF) B) and E)
G) All of the above

Question 14

In one year,a weapons plant can manufacture either 1,000 more guns or 50 more tanks.The plant's opportunity cost of an extra gun is approximately

Accepted Answer

A)   50 tanks
B)   20 guns
C)   20 tanks
D)   1/20 of a tank
E)   1/50 of a tankF) A) and B)
G) A) and C)

Question 15

An economist claims that "the evidence suggests that high rates of inflation are associated with slow long-term economic growth." This is an example of

Accepted Answer

A)   positive economics
B)   normative economics
C)   negative economics
D)   a simplifying assumption
E)   microeconomic analysisF) A) and C)
G) C) and D)

Question 16

A microeconomist might study which of the following?

Accepted Answer

A)   how inflation changes over time for several countries
B)   how money supply aggregates are measured
C)   economic growth in less-developed countries in Africa
D)   the relationship between aggregate income and aggregate personal consumption
E)   why wages for females are lower than for males in a particular labor marketF) B) and E)
G) B) and D)

Question 17

Normative economics deals with

Accepted Answer

A)   social norms and customs that influence economic behavior
B)   norms of behavior that can be taken as facts
C)   statements of fact
D)   statements about the value of a proposed policy
E)   government rules and regulations that drag down the economyF) None of the above
G) A) and D)

Question 18

Which if the following is a normative statement?

Accepted Answer

A)   The extent of income inequality in the United States is unjust.
B)   An increase in the demand for gasoline will lead to an increase in its price.
C)   The American Recovery and Reinvestment Act has created hundreds of thousands of jobs.
D)   The current unemployment rate is 8.5%
E)   Inflation harms individuals living on fixed incomes.F) A) and D)
G) B) and C)

Exam 1: What Is Economics

A critical assumption

Correct Answer
verified

Suppose that the Council of Economic Advisers tells the President that "the unemployment rate is 4 percent." The President responds,"That rate is still too high." The President's statement is

Correct Answer
verified

An economist claims that "the evidence suggests that high rates of inflation are associated with slow long-term economic growth." This is an example of

Correct Answer
verified

Which of the following is most closely associated with positive economics?

Correct Answer
verified

The study of how firms interact in a market is a

Correct Answer
verified

Which if the following is a normative statement?

Correct Answer
verified

The unemployment rate for the economy as a whole is a(n)

Correct Answer
verified

Normative economics deals with

Correct Answer
verified

The Congressional Budget Office and the Office of Management and Budget each produce deficit forecasts for a fiscal year.They use models that are mostly similar but have notable differences.As such,the disagreements are likely usually over

Correct Answer
verified

Macroeconomics is the branch of economics that concerns

Correct Answer
verified

The statement that "IBM's stock closed at $85" is

Correct Answer
verified

Positive economics deals with

Correct Answer
verified

Microeconomics is the branch of economics that concerns

Correct Answer
verified

A microeconomist might study which of the following?

Correct Answer
verified

Because resources are scarce,if society produces more of one commodity,it has to sacrifice some amount of another commodity.The amount sacrificed is

Correct Answer
verified

Society as a whole faces opportunity costs because

Correct Answer
verified

In one year,a weapons plant can manufacture either 1,000 more guns or 50 more tanks.The plant's opportunity cost of an extra gun is approximately

Correct Answer
verified

Understanding the distinction between positive and normative economic statements is important because it

Correct Answer
verified

Exam 1: What Is Economics

A critical assumption

Correct AnswerverifiedShow Answer

Suppose that the Council of Economic Advisers tells the President that "the unemployment rate is 4 percent." The President responds,"That rate is still too high." The President's statement is

Correct AnswerverifiedShow Answer

An economist claims that "the evidence suggests that high rates of inflation are associated with slow long-term economic growth." This is an example of

Correct AnswerverifiedShow Answer

Which of the following is most closely associated with positive economics?

Correct AnswerverifiedShow Answer

The study of how firms interact in a market is a

Correct AnswerverifiedShow Answer

Which if the following is a normative statement?

Correct AnswerverifiedShow Answer

The unemployment rate for the economy as a whole is a(n)

Correct AnswerverifiedShow Answer

Normative economics deals with

Correct AnswerverifiedShow Answer

The Congressional Budget Office and the Office of Management and Budget each produce deficit forecasts for a fiscal year.They use models that are mostly similar but have notable differences.As such,the disagreements are likely usually over

Correct AnswerverifiedShow Answer

Macroeconomics is the branch of economics that concerns

Correct AnswerverifiedShow Answer

The statement that "IBM's stock closed at $85" is

Correct AnswerverifiedShow Answer

Positive economics deals with

Correct AnswerverifiedShow Answer

Microeconomics is the branch of economics that concerns

Correct AnswerverifiedShow Answer

A microeconomist might study which of the following?

Correct AnswerverifiedShow Answer

Because resources are scarce,if society produces more of one commodity,it has to sacrifice some amount of another commodity.The amount sacrificed is

Correct AnswerverifiedShow Answer

Society as a whole faces opportunity costs because

Correct AnswerverifiedShow Answer

In one year,a weapons plant can manufacture either 1,000 more guns or 50 more tanks.The plant's opportunity cost of an extra gun is approximately

Correct AnswerverifiedShow Answer

Understanding the distinction between positive and normative economic statements is important because it

Correct AnswerverifiedShow Answer

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