Thinking Like An Economist Part VI

33. Which of the following is an example of a normative, as opposed to positive, statement? a. Universal health care would be good for U.S. citizens. b. An increase in the cigarette tax would cause a decrease in the number of smokers. c. A decrease in the minimum wage would decrease unemployment. d. A law requiring the federal government to balance its budget would increase economic growth. ANS: A 34. Which of the following is an example of a normative, as opposed to positive, statement? a. Gasoline prices ought to be lower than they are now. b. The federal government should raise taxes on wealthy people. c. The social security system is a good system and it deserves to be preserved as it is. d. All of the above are normative statements. ANS: D 35. Which of the following is an example of a normative, as opposed to positive, statement? a. If the price of a product decreases, people’s willingness to buy that product will increase. b. Reducing tax rates on the wealthy would benefit the nation. c. If the national saving rate were to increase, so would the rate of economic growth. d. The elimination of trade restrictions would increase an economy’s standard of living. ANS: B 36. Which of the following is an example of a normative, as opposed to positive, statement? a. The price of gasoline came down sharply during the second half of 2006. b. If the government were to set a maximum legal price on gasoline, then there would be a shortage of gasoline. c. Income taxes should be reduced. d. The federal government obtains much of its revenue from income taxes. ANS: C 37. The Council of Economic Advisers a. was created in 1776 and consists of three members and a staff of several dozen economists. b. was created in 1776 and consists of thirty members and a staff of a dozen economists. c. was created in 1946 and consists of three members and a staff of several dozen economists. d. was created in 1946 and consists of thirty members and a staff of a dozen economists. ANS: C 38. The Council of Economic Advisers a. was created in 1946. b. advises the president of the United States on economic policy matters. c. writes the annual Economic Report of the President. d. All of the above are correct. ANS: D 39. Duties of the Council of Economic Advisers include 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. ANS: A 40. In addition to advising the president, one duty of the Council of Economic Advisors is to a. prepare the federal budget. b. write government regulations. c. advise Congress on economic matters. d. write the annual Economic Report of the President. ANS: D 41. Economists at the Department of the Treasury a. design U.S. currency and coins. b. provide Congress with the annual budget. c. enforce the U.S. antitrust laws. d. provide advice on tax policy to the President. ANS: D 42. The president of the United States receives tax policy advice from economists in the a. Federal Reserve. b. Department of Justice. c. Department of the Treasury. d. Congressional Budget Office. ANS: C 43. The design of tax policy is one of the responsibilities of economists who work at the a. Council of Economic Advisers. b. Federal Reserve. c. Department of the Treasury. d. Congressional Budget Office. ANS: C 44. A duty of economists at the Department of Labor is to a. analyze data on workers. b. schedule federal holidays. c. enforce the nation's antitrust laws. d. All of the above are correct. ANS: A 45. Economists at the Department of Justice a. track the behavior of the nation’s money supply. b. advise Congress on economic matters. c. help enforce the nation’s antitrust laws. d. prepare the federal budget. ANS: C 46. The nation's antitrust laws are enforced by economists at the Department of a. Labor. b. Health and Human Services. c. Justice. d. Treasury. ANS: C 47. Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employs economists outside of the administrative branch? a. the Department of Labor b. the Department of the Treasury c. the Congressional Budget Office d. the Council of Economic Advisers ANS: C 48. Economists who are primarily responsible for advising Congress on economic matters work in which agency? a. the Federal Reserve b. the Congressional Budget Office c. the Department of the Treasury d. the Department of Commerce ANS: B 49. Congress relies on economists at the Congressional Budget Office to a. enforce the nation's antitrust laws. b. set the nation’s monetary policy. c. provide evidence that incumbent members of Congress are performing well in their jobs. d. provide independent evaluations of policy proposals. ANS: D 50. The Federal Reserve a. designs tax policy. b. enforces the nation's antitrust laws. c. sets the nation's monetary policy. d. analyzes data on workers. ANS: C 51. John Maynard Keynes believed the ideas of economists to be a. generally incorrect. b. powerful. c. academic and without practical application. d. rantings of madmen. ANS: B Sec03 - Thinking Like an Economist - Why Economists Disagree MULTIPLE CHOICE 1. < If all economists were laid end to end, they would not reach a conclusion.= Who made this whimsical observation? a. Harry Truman b. George Bernard Shaw c. John Maynard Keynes d. Ronald Reagan ANS: B 2. President Ronald Reagan once joked that a Trivial Pursuit game designed for economists would a. have no questions but hundreds of answers. b. have 100 questions and 3,000 answers. c. have 1,000 questions but no answers. d. never produce a winner. ANS: B 3. Economists sometimes give conflicting advice because a. graduate students in economics are encouraged to argue with each other. b. economists have different values and scientific judgment. c. economists acting as scientists do not like to agree with economists acting as policy advisers. d. economics is more of a belief system than a science. ANS: B 4. The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in a. opinions and education. b. opinions and values. c. scientific judgments and education. d. scientific judgments and values. ANS: D 5. Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement? a. One economist believes income tax cuts are unfair to those with low incomes; another economist believes income tax cuts are not unfair to those with low incomes. b. One economist believes unemployment causes more human suffering than does inflation; another economist believes inflation causes more human suffering than does unemployment. c. One economist believes the policies of the Democratic party offer the best hope for America's future; another economist believes the policies of the Republican party offer the best hope for America's future. d. One economist believes increases in the minimum wage increase unemployment; another economist believes increases in the minimum wage do not increase unemployment. ANS: D 6. Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement? a. One economist believes the North American Free Trade Agreement (NAFTA) has led to a loss of American jobs; another economist disputes this claim. b. One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving. c. One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people. d. One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth. ANS: C 7. Which of the following statements is correct about the extent of disagreement among economists? a. There is a great deal of agreement among economists on virtually every economic issue. b. There is a great deal of agreement among economists on many important economic issues. c. All disagreements among economists are attributable to differences in their values. d. All disagreements among economists are attributable to the fact that different economists have different degrees of faith in the validity of alternative economic theories. ANS: B 8. A survey which sought the opinion of professional economists on fourteen propositions about economic policy found that a. the respondents were almost equally divided on the propositions. b. the respondents favored the propositions by a slight margin. c. the respondents disagreed with the propositions by a slight margin. d. there was overwhelming endorsement of the propositions among the respondents. ANS: D 9. A survey of professional economists revealed that more than three-fourths of them agreed with a number of statements, including which of the following? a. Tariffs and import quotas usually reduce general economic welfare. b. A large federal budget deficit has an adverse effect on the economy. c. A minimum wage increases unemployment among young and unskilled workers. d. All of the above are correct. ANS: D 10. A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions? a. The United States should not restrict employers from outsourcing work to foreign countries. b. The United States should withdraw from the North American Free Trade Agreement (NAFTA). c. The United States should eliminate agricultural subsidies. d. Local and state governments should eliminate subsidies to professional sports franchises. ANS: B 11. A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions? a. A ceiling on rents reduces the quantity and quality of housing available. b. Fiscal policy has a significant stimulative impact on a less than fully employed economy. c. d. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. The United States should implement universal health care for its citizens. ANS: D 12. Almost all economists agree that rent control a. has no effect on the rental income of landlords. b. allows the market for housing to work more efficiently. c. adversely affects the availability and quality of housing. d. is a very inexpensive way to help the most needy members of society. ANS: C 13. Policies such as rent control and trade barriers persist in spite of the fact that economists are virtually united in their opposition to such policies, probably because a. economists have not yet convinced the general public that the policies are undesirable. b. economists engage in positive analysis, not normative analysis. c. economists have values that are different from the values of most non-economists. d. economists’ theories are not easily confirmed or refuted in laboratory analysis. ANS: A 14. Policies such as rent control and trade barriers persist a. because economists are about evenly divided as to the merits of those policies. b. because almost all economists agree that those policies have no discernible economic effects. c. because almost all economists agree that those policies are desirable. d. despite the fact that almost all economists agree that those policies are undesirable. ANS: D Sec04 - Thinking Like an Economist - Let's Get Going MULTIPLE CHOICE 1. John Maynard Keynes referred to economics as an easy subject, a. at which very few excel. b. but not as easy as philosophy or the pure sciences. c. which very few can enjoy. d. which deals primarily with common sense. ANS: A 2. How did the influential economist John Maynard Keynes explain his remark that although economics is an easy subject compared with the higher branches of philosophy or pure science, it is a subject at which few excel? a. Most people who study economics are not very bright. b. Good economists must possess a rare combination of gifts. c. Economics is quite boring; hence, people tend to lose interest in it before mastering it. d. Good thinkers become frustrated with economics because it does not make use of the scientific method. ANS: B Sec05 - Thinking Like an Economist - Graphing: A Brief Review MULTIPLE CHOICE 1. Which of the following is not correct? a. When developing economic theories, graphs offer a way to visually express ideas that might be less clear if described with equations or words. b. Graphs are one way of expressing the relationships among variables. c. When studying the relationship between two economic variables, graphs allow economists to draw indisputable conclusions about causes and effects. d. When analyzing economic data, graphs provide a powerful way of finding and interpreting patterns. ANS: C 2. Which of the following is not an example of a graph of a single variable? a. a pie chart b. a bar graph c. a time-series graph d. a scatterplot ANS: D 3. Graphs such as bar graphs and pie charts are limited in that they 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. ANS: C 4. The use of the coordinate system allows a. for the display of the flows of dollars, goods and services, and factors of production in an economic system. b. for the display of how labor and other resources are organized in the production process. c. for the display of two variables on a single graph. d. for the creation of pie charts and bar graphs. ANS: C 5. In order to display information on two variables, an economist must use a. a bar graph. b. a pie chart. c. the coordinate system. d. a time-series graph. ANS: C 6. An ordered pair is a. the process of checking calculations twice before placing them on a graph. b. two numbers that can be represented by a single point on a graph. c. two numbers that are represented by two points on a graph. d. two points on a graph that are of equal distance from the origin. ANS: B 7. The x-coordinate is the a. first number of an ordered pair and represents the point's horizontal location. b. second number of an ordered pair and represents the point's horizontal location. c. first number of an ordered pair and represents the point's vertical location. d. second number of an ordered pair and represents the point's vertical location. ANS: A 8. The x-coordinate of an ordered pair specifies the a. diagonal location of the point. b. vertical location of the point. c. horizontal location of the point. d. quadrant location in which the point is located. ANS: C 9. The first number in any ordered pair is a. the x-coordinate. b. the y-coordinate. c. the vertical location of the point. d. the slope. ANS: A 10. The y-coordinate is the a. first number of an ordered pair and represents the point's horizontal location. b. second number of an ordered pair and represents the point's horizontal location. c. first number of an ordered pair and represents the point's vertical location. d. second number of an ordered pair and represents the point's vertical location. ANS: D 11. The y-coordinate of an ordered pair specifies the a. diagonal location of the point. b. vertical location of the point. c. horizontal location of the point. d. quadrant location in which the point is located. ANS: B 12. The second number in any ordered pair is a. the x-coordinate. b. the y-coordinate. c. the horizontal location of the point. d. the slope. ANS: B 13. In the ordered pair (17, 75), 17 is the a. vertical location of the point. b. the slope. c. the x-coordinate. d. the y-coordinate. ANS: C 14. In the ordered pair (17, 75), 75 is the a. horizontal location of the point. b. the slope. c. the x-coordinate. d. the y-coordinate. ANS: D 15. The point where both x and y are zero is known as the a. origin. b. null. c. zero coordinate. d. center. ANS: A 16. The ordered pair that represents the origin on a graph is a. (1, 1). b. (0, 0). c. (-1, -1). d. ( ). ANS: B 17. When two variables have a positive correlation, 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 negative. ANS: B 18. When two variables have a positive correlation, a. when the x-variable increases, the y-variable decreases. b. when the x-variable decreases, the y-variable increases. c. when the x-variable increases, the y-variable increases. d. More than one of the above is correct. ANS: C 19. When two variables have a negative correlation, 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. ANS: A 20. When two variables have a negative correlation, a. when the x-variable decreases, the y-variable decreases. b. when the x-variable decreases, the y-variable increases. c. when the x-variable increases, the y-variable increases. d. More than one of the above is correct. ANS: B Figure 2-12 21. Refer to Figure 2-12. The graph shown is known as a a. time-series graph. b. bar graph. c. scatterplot. d. pie chart. ANS: C 22. Refer to Figure 2-12. Cups of coffee per day and the hours that someone can go without sleep appear to have a. a positive correlation. b. a negative correlation. c. a random correlation. d. no correlation. ANS: A 23. Refer to Figure 2-12. Taking cause and effect into account, which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep? a. The less coffee a person drinks per day, the more time he can go without sleep. b. There is no relationship between how much coffee per day a person drinks and how long he can go without sleep. c. The more coffee a person drinks per day, the more time he can go without sleep. d. The more coffee a person drinks per day, the less time he can go without sleep. ANS: C 24. When two variables move in opposite directions, the curve relating them is a. upward sloping, and we say the variables are positively related. b. upward sloping, and we say the variables are negatively related. c. downward sloping, and we say the variables are positively related. d. downward sloping, and we say the variables are negatively related. ANS: D 25. When two variables move in the same direction, the curve relating them is a. upward sloping, and we say the variables are positively related. b. upward sloping, and we say the variables are negatively related. c. downward sloping, and we say the variables are positively related. d. downward sloping, and we say the variables are negatively related. ANS: A 26. When a relevant variable that is not named on either axis changes, a. there will be a movement along the curve. b. the curve will rotate clockwise. c. the curve will be unaffected since only the variables on the axis affect the curve. d. the curve will shift. ANS: D 27. Suppose price is measured along the vertical axis on a graph. When price changes, there will be a a. rotation of the curve. b. shift of the curve. c. movement along the curve. d. change in the slope of the curve. ANS: C 28. A demand curve shows the relationship a. between income and quantity demanded. b. between price and income. c. between price and quantity demanded. d. among income, price, and quantity demanded. ANS: C 29. If Steven’s income decreases and, as a result, he chooses to buy fewer bagels per month at each price, then his demand curve will a. shift to the right. b. shift to the left. c. not shift; instead, Steven will move along his demand curve downward and to the right. d. not shift; instead, Steven will move along his demand curve upward and to the left. ANS: B ANS: A 35. The slope of a line is equal to a. the change in the value of x divided by the change in the value of y. b. the change in the value of y divided by the change in the value of x. c. the horizontal distance divided by the vertical distance. d. the value of y divided by the value of x. ANS: B 36. The slope of a line is equal to a. rise divided by run. b. run divided by rise. c. rise minus run. d. rise plus run. ANS: A 37. Which of the following is not correct? a. The slope of a line will be a small positive number for a fairly flat upward-sloping line. b. The slope of a line will be a large positive number for a steep upward-sloping line. c. The slope of a line will be a negative number for a downward-sloping line. d. The slope of a line will be infinite for a horizontal line. ANS: D 38. Which of the following is correct? a. A horizontal line has an infinite slope, and a vertical line has a zero slope. b. A horizontal line has a slope of 1, and a vertical line has a slope of -1. c. A horizontal line has a zero slope, and a vertical line has an infinite slope. d. A horizontal line has a slope of -1, and a vertical line has a slope of 1. ANS: C 39. The slope of a fairly flat upward-sloping line will be a a. small positive number. b. large positive number. c. small negative number. d. large negative number. ANS: A 40. The slope of a steep upward-sloping line will be a a. small positive number. b. large positive number. c. small negative number. d. large negative number. ANS: B 41. The slope of a line that passes through the points (10, 15) and (20, 7) is a. -5/4. b. -4/5. c. 4/5. d. 5/4. ANS: B 42. The slope of a line that passes through the points (15, 10) and (7, 30) is a. -5/2. b. -2/5. c. 2/5. d. 5/2. ANS: A 43. A relatively steep demand curve indicates that a. quantity demanded will adjust only slightly to a price change. b. quantity demanded will adjust significantly to a price change. c. quantity demanded will not adjust to a price change. d. the change in quantity demanded will exactly equal a change in price. ANS: A 44. A relatively flat demand curve indicates that a. quantity demanded will adjust only slightly to a price change. b. quantity demanded will adjust significantly to a price change. c. quantity demanded will not adjust to a price change. d. the change in quantity demanded will exactly equal a change in price. ANS: B 45. Suppose that someone makes the argument that because empty alcohol containers are found at many accidents, the containers cause accidents. This would be an example of a. sound logic. b. reverse causality. c. omitted variables. d. bias. ANS: C 46. Bill has noticed that increases in unemployment insurance claims are associated with recessions, and therefore he advocates limits on unemployment insurance so as to prevent recessions. Martha has noticed that most drug addicts once attended schools, and therefore she advocates getting rid of schools so as to prevent drug addiction. a. The reasoning of both Bill and Martha suffers from the omitted variable problem. b. The reasoning of both Bill and Martha suffers from the reverse causality problem. c. Bill's reasoning suffers from the reverse causality problem, and Martha's reasoning suffers from the omitted variable problem. d. Martha's reasoning suffers from the reverse causality problem, and Bill's reasoning suffers from the omitted variable problem. ANS: A 47. In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of a. omitted variables. b. reverse causality. c. government propaganda. d. medical incompetence. ANS: B