Economic Policies and their Impact
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Questions and Answers

According to the text, what is the essence of science in economics?

  • The development and testing of theories about how the world works (correct)
  • The simplification of the complex world
  • The conducting of experiments
  • The use of theory and observation

    • According to the text, why do economists face challenges in conducting experiments?

  • Economists do not use theory and observation like other scientists
  • Economists do not use the scientific method
  • Economists do not pay attention to natural experiments offered by history
  • Conducting experiments is often difficult and sometimes impossible in economics (correct)

    • According to the text, what role do assumptions play in economics?

  • Assumptions are only used to study long-run effects
  • Assumptions can simplify the complex world and make it easier to understand (correct)
  • Assumptions are only used to study short-run effects
  • Assumptions are not important in economic thinking

    • According to the text, what is the art in scientific thinking in economics?

    <p>Deciding which assumptions to make</p> Signup and view all the answers

    According to the text, why do economists use different assumptions?

    <p>To answer different questions</p> Signup and view all the answers

    According to the text, what do economists pay close attention to?

    <p>Natural experiments offered by history</p> Signup and view all the answers

    According to the text, what is the role of economists in addressing their subject?

    <p>To address their subject with a scientist's objectivity</p> Signup and view all the answers

    Which of the following is an example of a positive statement in economics?

    <p>A fall in interest rates will reduce the savings rate.</p> Signup and view all the answers

    Which of the following is an example of a normative statement in economics?

    <p>Government should increase tax on demerit goods like cigarettes.</p> Signup and view all the answers

    What percentage of economists agree that a ceiling on rents reduces the quantity and quality of housing available?

    <p>93%</p> Signup and view all the answers

    What percentage of economists agree that tariffs and import quotas usually reduce general economic welfare?

    <p>93%</p> Signup and view all the answers

    What percentage of economists agree that flexible and floating exchange rates offer an effective international monetary arrangement?

    <p>90%</p> Signup and view all the answers

    What percentage of economists agree that fiscal policy has a significant stimulative impact on a less than fully employed economy?

    <p>90%</p> Signup and view all the answers

    What percentage of economists agree that economic growth in developed countries like the United States leads to greater levels of well-being?

    <p>88%</p> Signup and view all the answers

    Which of the following is a purpose of graphs?

    <p>To visually express ideas that might be less clear if described with equations or words</p> Signup and view all the answers

    What is the coordinate system used to display two variables on a single graph called?

    <p>Ordered pairs</p> Signup and view all the answers

    When two variables move in opposite directions, the curve on a graph is

    <p>Downward sloping</p> Signup and view all the answers

    What is the ratio of the vertical distance covered to the horizontal distance covered called?

    <p>Slope</p> Signup and view all the answers

    In the given graph, what is the slope of the demand curve between the points (21 novels, $6) and (13 novels, $8)?

    <p>-1/4</p> Signup and view all the answers

    What does a fairly flat upward-sloping line indicate?

    <p>A small positive slope</p> Signup and view all the answers

    What does a steep upward-sloping line indicate?

    <p>A large positive slope</p> Signup and view all the answers

    What does a downward sloping line indicate?

    <p>A negative slope</p> Signup and view all the answers

    What is the slope of a horizontal line?

    <p>Zero</p> Signup and view all the answers

    Which of the following best describes the circular flow diagram?

    <p>A diagram that shows the flow of resources from households to firms and of products from firms to households</p> Signup and view all the answers

    What does the production possibilities frontier represent?

    <p>The combinations of output that the economy can possibly produce given the available factors of production and the available production technology</p> Signup and view all the answers

    Which of the following is an example of an inefficient level of production?

    <p>A point inside the production possibilities frontier</p> Signup and view all the answers

    What does the slope of the production possibilities frontier represent?

    <p>The opportunity cost of manufactured goods in terms of agricultural goods</p> Signup and view all the answers

    What is the opportunity cost of producing 1 unit of agricultural goods in terms of manufactured goods?

    <p>4/5 units of manufactured goods</p> Signup and view all the answers

    What is the opportunity cost of producing 1 unit of manufactured goods in terms of agricultural goods?

    <p>5/4 units of agricultural goods</p> Signup and view all the answers

    What does technological advancement lead to?

    <p>The production possibilities frontier shifting outward</p> Signup and view all the answers

    Positive statements are ______ statements dealing with matter of fact or they question about how things actually are.

    <p>objective</p> Signup and view all the answers

    Normative statements are ______ or value judgment.

    <p>opinion</p> Signup and view all the answers

    Economists may have different ______ - Different normative views about what policy should try to accomplish.

    <p>values</p> Signup and view all the answers

    A ceiling on rents reduces the quantity and quality of ______ available.

    <p>housing</p> Signup and view all the answers

    Tariffs and import quotas usually reduce general economic ______.

    <p>welfare</p> Signup and view all the answers

    Flexible and floating exchange rates offer an effective international ______ arrangement.

    <p>monetary</p> Signup and view all the answers

    Economic growth in developed countries like the United States leads to greater levels of ______.

    <p>well-being</p> Signup and view all the answers

    According to the text, what is the essence of science in economics?

    <p>the scientific method</p> Signup and view all the answers

    According to the text, what do economists pay close attention to?

    <p>natural experiments</p> Signup and view all the answers

    According to the text, why do economists use different assumptions?

    <p>to answer different questions</p> Signup and view all the answers

    What does a fairly flat upward-sloping line indicate?

    <p>a small change in one variable is associated with a large change in the other variable</p> Signup and view all the answers

    What does a steep upward-sloping line indicate?

    <p>a large change in one variable is associated with a small change in the other variable</p> Signup and view all the answers

    What does a downward sloping line indicate?

    <p>a decrease in one variable is associated with a decrease in the other variable</p> Signup and view all the answers

    Which of the following best describes the circular flow diagram?

    <p>a visual model of how the economy is organized</p> Signup and view all the answers

    Graphs serve two purposes: – Visually express ideas that might be less clear if described with ______ or words

    <p>equations</p> Signup and view all the answers

    The coordinate system – Display two variables on a single graph (ex: price and quantity) – Ordered pairs of points x-coordinate – Horizontal location y-coordinate – Vertical ______

    <p>location</p> Signup and view all the answers

    Negatively related variables – The two variables move in ______ direction – Downward sloping ______

    <p>opposite, curve</p> Signup and view all the answers

    Positively related variables – The two variables move in the ______ direction – Upward sloping ______

    <p>same, curve</p> Signup and view all the answers

    Calculating Slope: – Ratio of the vertical distance covered – To the horizontal distance ______ Δ (delta) → change in a variable Δ y → change in y Δ x → change in ______

    <p>covered, x</p> Signup and view all the answers

    To calculate the slope of the demand curve, we can look at the changes in the x- and y-coordinates as we move from the point (21 novels, $6) to the point (13 novels, $8). The slope of the line is the ratio of the change in the y-coordinate (–2) to the change in the x-coordinate (+8), which equals ______

    <p>-1/4</p> Signup and view all the answers

    Types of Slope – Fairly flat upward-sloping line Slope is a small positive ______ – Steep upward-sloping line Slope is a large positive ______ – Downward sloping line Slope is a ______ number – Horizontal line: slope is ______ – Vertical line: infinite ______

    <p>number, positive, negative, zero, slope</p> Signup and view all the answers

    According to the text, what role do assumptions play in economics? ______

    <p>assumptions</p> Signup and view all the answers

    What does the production possibilities frontier ______?

    <p>represent</p> Signup and view all the answers

    According to the circular flow diagram, households are ______ and firms are ______.

    Signup and view all the answers

    According to the circular flow diagram, households are ______ and firms are ______.

    Signup and view all the answers

    According to the circular flow diagram, households are ______ and firms are ______.

    <p>buyers, sellers</p> Signup and view all the answers

    The ______ of the production possibilities frontier measures the opportunity cost of manufactured goods in terms of agricultural goods. This opportunity cost varies, depending on how much of the two goods the economy is producing.

    <p>slope</p> Signup and view all the answers

    The economy can produce any combination on or inside the frontier. Inefficient levels of production: Points inside the production possibilities frontier. Ex: Point X (the resources may get wasted, left idle or misallocated) Efficient levels of production: The economy is getting all it can from the scarce resources available Points on the production possibilities frontier. Ex: Point A, B and C Unattainable levels of production: Points outside the frontier are not feasible given the economy’s resources. Ex: Point Y

    <p>inside, outside</p> Signup and view all the answers

    What is the opportunity cost of producing 1 unit of manufactured goods in terms of agricultural goods?

    <p>5/4 units of agricultural goods</p> Signup and view all the answers

    Technological advancement…… – Leads the production possibilities frontier to shift ______.

    <p>outward</p> Signup and view all the answers

    To produce 1 unit of agricultural goods: 25 units of agricultural goods = 20 units of manufactured goods 25 units of agricultural goods /25 = 20 units of manufactured goods /25 1 units of agricultural good = 4/5 units of manufactured goods Opportunity cost in terms of manufactured goods To produce 1 unit of manufactured goods: 20 units of manufactured goods = 25 units of agricultural goods 20 units of manufactured goods /20 = 25 units of agricultural goods /20 1 units of manufactured good = ______ units of agricultural goods

    <p>5/4</p> Signup and view all the answers

    Opportunity cost in terms of agricultural goods To produce 1 unit of agricultural goods: 25 units of agricultural goods = 20 units of manufactured goods 25 units of agricultural goods /25 = ______ units of manufactured goods /25 1 units of agricultural good = 4/5 units of manufactured goods

    <p>20</p> Signup and view all the answers

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