ECON200 chapter 2 multiple choice
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Economists make assumptions
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to make the world easier to understand
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If an economist develops a theory about international trade based on the assumption that there are only two countries and two goods
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the theory can be useful in understanding the more complex world of involving many countries and goods
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A circular-flow diagram is a model that
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explains how the economy is organised
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Factors of production are
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inputs into the production process
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In the simple circular-flow diagram, the decision makers consist of
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households and firms
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In the circular-flow diagram
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households are sellers in the resource market
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Which of the following would NOT be considered a factor of production
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money
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In the goods and services market, households
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are buyers and firms are sellers
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In the factors of production market, households
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are sellers and firms are buyers
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the four sectors in a more complex circular-flow diagram include
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households, firms, government and international trade
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In economics, capital refers to
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fixed assets used in the production process
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An economic outcome is said to be efficient if the economy is
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getting all it can from the scarce resources it has available
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Which of the following concepts is illustrated by the production possibilities frontier
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Efficiency
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The curved shape of the production possibilities frontier can be explained by
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increasing cost of production
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Suppose a nation is currently producing at a point on its production possibilities frontier. We know that
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the nation is producing an efficient combination of goods
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When a production possibilities frontier shifts outward, it is demonstrating the concept of
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economic growth
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The field of economics is traditionally divided into two broad sub-fields
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microeconomics and macroeconomics
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Macroeconomics is the study of
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economy-wide phenomena
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Which of the following would be considered a topic of study in macroeconomics
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The effect of an increase in the price of oil on the New Zealand inflation rate
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A macroeconomist would study each of the following EXCEPT the
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impact of minimum-wage laws on employment in the fast food industry
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Which is the best statement about the roles of economists
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In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers
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Positive statements are best described as
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descriptive, making a claim about how the world is
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Normative statements are best described as
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prescriptive, making a claim about how the world ought to be
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Which of the following is an example of a positive statement
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Prices rise when the government prints too much money
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Which of the following is an example of a normative statement
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Reducing tax rates on the wealthy would be good for the country
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When economists are speaking as policy advisors, they are more likely to use
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normative statements
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When 2 variables have a negative correlation
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they tend to move in opposite directions
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A demand curve shows the relationship
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between price and quantity demanded
