Question 1

Using the outline below, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> This diagram should duplicate the essen...

Question 2

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) B) and C)
F) A) and B)

Question 3

If Erin's income decreases and, as a result, she chooses to buy fewer milkshakes per month at each price, then her demand curve will

Accepted Answer

A)   shift to the right.
B)   shift to the left.
C)   not shift; instead, Erin will move along her demand curve downward and to the right.
D)   not shift; instead, Erin will move along her demand curve upward and to the left.E) A) and B)
F) A) and C)

Question 4

Economists build economic models by

Accepted Answer

A)   generating data.
B)   conducting controlled experiments in a lab.
C)   making assumptions.
D)   reviewing statistical forecasts.E) None of the above
F) A) and D)

Question 5

Figure 2-5
 
-Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C is

Accepted Answer

A)   75 soccer balls.
B)   125 soccer balls.
C)   125 soccer balls and 240 sweaters.
D)   240 sweaters.E) None of the above
F) A) and D)

Question 6

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) None of the above
F) All of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A macroeconomist - as opposed to a microeconomist - would study

Accepted Answer

A)   the effects of rent control on housing in New York City.
B)   the effects of foreign competition on the US auto industry.
C)   the effects of borrowing by the federal government.
D)   the effects of raising the gasoline tax on transit ridership.E) B) and C)
F) C) and D)

Question 9

The design of tax policy is one of the responsibilities of economists who work at the

Accepted Answer

A)   Council of Economic Advisers.
B)   Federal Reserve.
C)   Department of the Treasury.
D)   Congressional Budget Office.E) None of the above
F) All of the above

Question 10

An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.

Accepted Answer

A) True 
 B)False

Question 11

A microeconomist - as opposed to a macroeconomist - might study

Accepted Answer

A)   the effect of borrowing by the federal government on the inflation rate.
B)   the effect of rising oil prices on employment in the airline industry.
C)   changes in the nation's unemployment rate over short periods of time.
D)   alternative policies to promote higher living standards throughout the nation.E) B) and C)
F) C) and D)

Question 12

Who said, "The whole of science is nothing more than the refinement of everyday thinking"?

Accepted Answer

A)   Isaac Newton
B)   Albert Einstein
C)   Adam Smith
D)   Benjamin FranklinE) C) and D)
F) B) and C)

Question 13

The slope of a line passing through the points (12, 8)  and (16, 5)  is

Accepted Answer

A)   -3/4.
B)   3/4.
C)   -4/3.
D)   4/3.E) B) and D)
F) B) and C)

Question 14

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) All of the above
F) None of the above

Question 15

Figure 2-2
 
-Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent

Accepted Answer

A)   firms and households.
B)   households and government.
C)   the markets for goods and services and the markets for financial assets.
D)   the markets for goods and the markets for services.E) A) and D)
F) None of the above

Question 16

Duties of the Council of Economic Advisers include

Accepted Answer

A)   advising the president and writing the annual Economic Report of the President.
B)   implementing the president's tax policies.
C)   tracking the behavior of the nation's money supply.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 17

Economists view positive statements as

Accepted Answer

A)   affirmative, justifying existing economic policy.
B)   optimistic, putting the best possible interpretation on things.
C)   descriptive, making a claim about how the world is.
D)   prescriptive, making a claim about how the world ought to be.E) None of the above
F) All of the above

Question 18

Economic models

Accepted Answer

A)   cannot be useful if they are based on false assumptions.
B)   were once thought to be useful, but that is no longer true.
C)   must incorporate all aspects of the economy if they are to be useful.
D)   can be useful, even if they are not particularly realistic.E) B) and D)
F) C) and D)

Question 19

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good

Accepted Answer

A)   increases as more of the good is produced.
B)   decreases as more of the good is produced.
C)   does not change as more of the good is produced.
D)   may increase, decrease, or not change as more of the good is produced.E) None of the above
F) C) and D)

Question 20

Economic models are most often composed of diagrams and equations.

Accepted Answer

A) True 
 B)False

Exam 2: Thinking Like an Economist

A macroeconomist - as opposed to a microeconomist - would study

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The slope of a line passing through the points (12, 8) and (16, 5) is

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An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.

Correct AnswerverifiedShow Answer

Using the outline below, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram.

Correct Answerverified This diagram should duplicate the essen...View AnswerShow Answer

Economic models

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If Erin's income decreases and, as a result, she chooses to buy fewer milkshakes per month at each price, then her demand curve will

Correct AnswerverifiedShow Answer

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good

Correct AnswerverifiedShow Answer

Economists build economic models by

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Duties of the Council of Economic Advisers include

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

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Figure 2-2 -Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent

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The design of tax policy is one of the responsibilities of economists who work at the

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John Maynard Keynes believed the ideas of economists to be

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Figure 2-5 -Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C is

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Economic models are most often composed of diagrams and equations.

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Economists view positive statements as

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

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Who said, "The whole of science is nothing more than the refinement of everyday thinking"?

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A microeconomist - as opposed to a macroeconomist - might study

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

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This diagram should duplicate the essen...
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