Exam 1 – Flashcard
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The definition of economics states that it is the study of how? _________.
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agents choose to allocate scarce resources and the impact of those choices on society.
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The ethical implications of a hotly debated government policy would best be considered a? _________.
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normative? question, since it deals with a subjective issue based on personal preferences.
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Economics is divided into two broad fields of? study: microeconomics and macroeconomics. Microeconomics studies? _________, while macroeconomics studies? _________.
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a small piece of the overall? economy; the economy as a whole.
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Policy decisions made by the government are analyzed by? _________.
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both microeconomics and macroeconomics.
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Empiricism describes a situation where
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economists use data to analyze what is happening in the world.
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Optimization describes a situation where
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people weigh costs and benefits when making a decision
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Equilibrium describes a situation where
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no one would benefit from changing his or her behavior
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?Economics, anthropology,? psychology, sociology, and political science all study human behavior. Economics differs from these other social sciences because it also addresses these three key? concepts: _________.
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Optimization, equilibrium, and empiricism.
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During the process of optimization economists believe that people are considering? _________.
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the feasibility of a? choice, given the information available at the time.
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The goal of optimization for an individual is to maximize
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overall well-being
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Suppose that you allocate? $20 each week for your entertainment budget. This money is spent on two? items: either renting movies for? $1 each at Redbox or downloading songs from iTunes at? $1 each. Given this? information, which of the following would represent your budget constraint for? entertainment?
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Amount spent on iTunes? + Amount spent at Redbox? = $20.
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The opportunity cost of an activity is a measure of what is given up when you do that activity. ?Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the following? order: going to? class, sleeping in? late, going to work? early, getting? lunch, going to the gym to? exercise, and watching television. If you decide to go to? class, then what do we know about the opportunity cost of your? decision?
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The opportunity cost would be sleeping in? late, since it was your? next-best option.
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Comparing a set of feasible alternatives and picking the best one is an optimization process called? _________.
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cost-benefit analysis.
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When deciding whether to install visible countdown timers for pedestrians at? crosswalks, which of the following would be considered in the? cost-benefit analysis? ?(Check all that apply.?)
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The cost in terms of dollars of installing these new timers all over the city. Your answer is correct.B. The value of the lives lost by drivers who watch the countdown timers and try to make it through a light. Your answer is correct.C. The higher maintenance bill associated with fixing these more complex signals when they break down. Your answer is correct.D. The value of the? pedestrians' lives saved by having the timers to assist in crossing the street.
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In which of the following areas will taking an economics course help benefit you throughout your? life?
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A. It will instill the concept that what activity is given up by a decision plays an important role when making choices. B. It will give you the logic behind using? cost-benefit analysis when evaluating decisions. C. It will help you analyze and predict human behavior in a variety of situations. D. All of the above.
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Suppose your New Year resolution is to get back in shape. You are considering various ways of doing? this: you can sign up for a gym? membership, walk to? work, take the stairs instead of the? elevator, or watch your diet. How would you evaluate these options and choose an optimal? one? When making your decision about which activity to? choose, you should consider the monetary cost as well as the opportunity cost of the activities. The goal is to choose the option that offers the greatest net benefit.
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Do a? cost-benefit analysis to compare the alternatives.
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Free riding occurs when people's private benefits are out of sync with the public interest . Which of the following is subject to the? free-rider problem?
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All of the above.
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Which of the following is more susceptible to the? free-rider problem: government ?funded symphonies or city ? wide pest control??
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Use of city ?wide pest control is more susceptible since even those who? don't pay taxes still? benefit, while government ?funded symphonies can charge for admission?, so that everyone who goes pays their share.
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Which of the following is true regarding the concept of? causation?
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It describes how one event can bring about change in another.
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Which of the following is not an example of? causation?
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Washing your car will lead to raining that day
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Economists say the opportunity cost of an activity includes the value of the alternative use of your time . The opportunity cost of an activity takes account not only of required money outlay but also the value of the time you spend on the activity. The opportunity cost of your time can be roughly estimated using your wage . Positive economic? analysis_____________.
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involves objective statements that can be disproven using data
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Normative economic? analysis______________.
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may include subjective and ethical judgments. makes recommendations on the best decision to achieve a given end.
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Consider the following three? statements: Statement? 1: You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand. Statement 2?: Your friend tells you that he expects many people to stand at football games. Statement? 3: An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit. Which of these statements deals with? optimization, which deals with? equilibrium, and which deals with? empiricism? Explain. Statement 1 deals with? ____________.
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optimization, because you are choosing your best feasible option Statement 2 deals with? ____________. . ?equilibrium, because your friend presumes everyone is behaving optimally. Statement 3 deals with? ____________. empiricism, because it describes behavior using? real-world data.
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How does microeconomics differ from? macroeconomics?
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Microeconomics is the study of how? individuals, households,? firms, and governments make? choices, while macroeconomics is the study of the economy as a whole.
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Which of the following is not an item studied under microeconomics??
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Aggregate issues.
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Which of the following is true regarding the concept of? causation?
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It describes how one event can bring about change in another.
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Which of the following is not an example of? causation?
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wearing your lucky socks while watching the football game will lead to you team winning
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Free riding occurs because? _________.
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people sometimes pursue their own private interests and? don't contribute voluntarily to the public interest.
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The concept of opportunity cost is a measure of? _________.
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the value of the best alternative use of a resource.
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Suppose there are three activities in which you could? participate: 1. The opportunity cost of the first activity is missing 3 hours of work. 2. The opportunity cost of the second activity is missing a concert that you have tickets to. 3. The opportunity cost of the third activity is missing the afternoon nap that you take every day. Given this? information, for which of these activities would you be able to compare opportunity? costs?
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You can compare all the activities after you translate all the missed activities into dollar amounts.
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Which of the following would not be considered one of the possible opportunity costs of a recent high school graduate backpacking across Europe for a year.
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All of these is a possible opportunity cost.
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The process of critical thinking is useful in macroeconomics? because:
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Macroeconomics is focused on choosing effective policies.
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Which of the below is not a distinguishing characteristic of critical? thinking?
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Intuitiveness
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What is the critical thinking issue in the story? "What Do You? Mean, Mr.? President?" in Box? 1.3?
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Knowing what the issue is.
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Which of the following statements about the role of communication in the process of critical thinking is? false?
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Communication can play a? role, but more often than not its role is not important.
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The critical thinking step of coming to a? conclusion:
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Should include a consideration of the implications and consequences of your answer to the question at hand.
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The process of critical thinking often involves formal and informal writing. Why do critical thinkers use both types of? writing?
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Formal writing is used to communicate the results of? one's critical thinking and to persuade others that one is right. Informal writing is primarily intended for oneselft or others with whom one is? working, and is used to facilitate the critical thinking process itself.
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Critical thinking about macroeconomic issues requires that you do what before analyzing the particular issue at? hand?
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Take stock of any relevant macroeconomic? information, theories, and conclusions that you already hold or believe.
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Suppose that you are doing a macroeconomic research paper on whether to the Federal government should balance its budget in the coming year. Suppose further that in working on that paper you are frustrated by the inability to find statistics on government spending and economic growth in other countries. This frustration suggests you are having with what step of the critical thinking? process?
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Gathering relevant information to answer the question.
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What role do personal? (or professional) values play in thinking critically about macroeconomic? issues?
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Their role depends on the nature of the macroeconomic issue being investigated. ? However, one should be aware of any values that one holds that might be relevant to the macroeconomic issue.
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The process of thinking critically is best described? as:
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Deciding what the issue? is, becoming aware of your initial frame of? reference, gathering? information, and constructing a conclusion.
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Caveat lector? is:
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A summary of the argument that one should be skeptical when gathering information.
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Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. During a meeting with your? client, the CEO asks if your economic models include all factors that impact gasoline prices. What is your response to his? question?
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?No, the model is a simplified representation of reality.
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Your client becomes critical of your? "sloppy" technique of using a model that does not include all factors. What is the most appropriate reply to this? criticism?
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Economic models are meant to be approximations that predict what happens in most circumstances.
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Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client wants to know what will happen to gasoline demand if it increases gasoline prices by one cent higher than its nearest competitors. One of the members of your consulting? team, Debbie, shares that one time in college she stopped buying gasoline from a service station that was one cent more expensive. Based on this? story, should you conclude that demand will fall to zero if the client raises gas prices by one? cent? No?, since this is an argument by anecdote ?,which can lead to wrong conclusions. Instead of relying on? Debbie's college story to make a? conclusion, you decide it is smarter to collect and analyze? __________.
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a large amount of empirical data.
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Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on? customers' gasoline purchasing habits when they notice price increases. You suggest that the team? _____________.
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design and execute an experiment.
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Suppose that you are on a date with an economics? major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask what is or what will be and normative questions ask what ought to be . Which of the following examples do you provide as a normative? question?
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Should welfare be? repealed?
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Which of the following do you provide as a positive? question?
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How much is the national? debt?
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To say that economists use the scientific method means that they are using? ___________.
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an ongoing process to develop models of the world and then test and evaluate those models.
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How do economists distinguish between models that work and those that? don't?
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They test their models against? real-world data.
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How is the mean calculated from a series of? observations?
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The mean is the sum values of the observations divided by the number of observations.
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How does the sample size affect the validity of an empirical? argument?
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The larger the sample size the better.
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What is meant by randomization in the context of an economic? experiment?
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Subjects are assigned by? chance, rather than by? choice, to a group.
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As the text? explains, it can sometimes be very difficult to sort out the direction of causality. Causation occurs when there is? ____________.
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a logical? cause-and-effect relationship.
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A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus.? However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model? incorrect?
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No, because it predicts the outcome of increased bus ridership on average.
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How would you test this? model?
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You should run a natural experiment by analyzing bus ridership and price changes.
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Which of the following graphical representations can be used to show the distribution of a? household's income, in terms of? percentages, among the various categories of expenses most? appropriately?
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A pie chart
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An independent? variable:
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is manipulated by the experimenter in an experiment.
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A scatter? plot:
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shows the relationship between two variables at a point in time.
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Which of the following is an example of a natural? experiment?
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A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries
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An increase in returns to education over time means? that:
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the earnings gap between the median college graduate and median high school graduate has grown larger over time.
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True or? False: According to the data? presented, both men and women have seen an increase in the returns to a college degree between 1972 and 2012.
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True.
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Empiricism is a principle in economics that? _________
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uses data to test economic models.
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Which of the following pairs of variables are likely to be positively? correlated?
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Income and consumption
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Which of the following statements is? true?
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A bar chart indicates the frequency of a variable by using rectangles of different heights or lengths.
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As the number of advertisements of a firm increases from 100 to? 500, its sales increases from? $1,000 to? $10,000. If this information is plotted on a line? chart, the slope of the line? equals:
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$22.5.
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On a line? chart, the income of a consumer is measured along the horizontal? axis, and his consumption is measured along the vertical axis. The slope of the line is equal? to:
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change in consumption divided by change in income.
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Which of the following is most likely to be an example of? causation?
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A firm producing CFLs installs new machinery. The? per-day production of CFLs increases.
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A model refers? to:
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a simplified? description, or? representation, of reality.
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How would you represent the following? graphically? Income inequality in the United States has increased over the past 10 years. This could best be represented with a
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time series graph
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All the workers in the manufacturing sector in a particular country fit into one? (and only? one) of the following three? categories: 31.5 percent are high school? dropouts, 63.5 percent have a regular high school? diploma, and the rest have a vocational training certificate. This could best be represented with a
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pie chart
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The median income of a household in Alabama was? $43,464 in 2012 and the median income of a household in Connecticut was? $64,247 in 2012. This could best be represented with a
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bar graph
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A variable that is potentially affected by an experimental treatment is referred to as? a(n):
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dependent variable.
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Which of the following statements is? true?
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Testing with data enables economists to distinguish between good models and bad models.
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A correlation between two variables implies? that:
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there is a mutual relationship between both the variables.
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?Scenario: A model is based on an assumption that an additional year of education increases a? student's future wage by? 20% . Refer to the scenario above. Which of the following statements is true of the? model?
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The prediction of this model can be applied to unlimited years of additional education.
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Which of the following is the best example of causation? (versus correlation)?
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Oil prices go up and gasoline prices go up.
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Which of the following statements is true of the scientific? method?
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The scientific method may not reveal a? "true" model of the world.
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Suppose that your favorite aunt has just given you a? $100 gift certificate for your birthday that can be used at a local bookstore. Suppose further that you have decided to divide the money between books and coffee in some way and that the price of a book is? $20 and the price of a cup of coffee is? $2. Given these? facts, take a sheet of paper and graphically represent your budget constraint and label that constraint with the letter A. Then choose a point on constraint A that reflects in your estimation the best way to spend your gift certificate and label that point with the letter B. ? Now, based on your graph? (do not turn in the? graph), which statement below most accurately describes your? graph:
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Constraint A is the result of answering a positive? question; Point B is the result of answering a normative question.
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The question? "What has been the effect of deflation? (that is, a general fall in? prices) on the income of the average Japanese? worker?" is an example? of:
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A positive macroeconomic question.
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The? question, "Do most Americans believe that government is too? big? " is an example of? a:
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Factual question.
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The? question, "Do most Americans believe that government is too? big? " is an example of? a:
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Factual question.
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The question? "Slower economic growth increase income? inequality?" is an example? of:
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A positive macroeconomic question.
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Which of the following is an accurate description of the? question, "Do free trade agreements lead to faster economic? growth?":
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A macroeconomic reasoned judgment question.
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Which of the following is not a macroeconomics? question?
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How much will the California drought drive up the price of fresh ?vegetables?
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The? question, "Is the price of a share of IBM stock higher today than the price of a share of Xerox? stock?" is an example of? a:
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Factual question.
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Which of the following is a macroeconomic? question?
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How much would the unemployment rate fall if the economy grows by? 4% this ?year?
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The? question, "Does the minimum wage result in higher? unemployment?" is an example of? a:
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A reasoned judgment question.
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Which of the following is an accurate description of the? question, "How much of a premium would consumers be willing to pay for a solar powered? car?":
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A microeconomic reasoned judgment question.
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The question? "Is greater income inequality a moral? issue?" is an example? of:
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A normative macroeconomic question.
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The? question, "Do you like the handling of a Toyota more than a? Subaru?" is an example of? a:
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A taste question.
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Which of the following statements is not an example of a positive? question?
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Does China have the right policy when it comes to foreign ?trade?
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The Bureau of Economic Analysis calculates a number of different measures of inflation? - the GDP? Deflator, the Consumer Price? Index, the Wholesale Price? Index, etc. Given? that, which of the following is an accurate description of the? question, "What is the best measure of the average annual level of inflation over the past 10? years?":
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A macroeconomic reasoned judgment question.
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The? question, "Do businesses primarily fail because of? mismanagement?" is an example of? a:
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A reasoned judgment question.
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Which of the following is an accurate description of the? question, "Did the Federal Reserve accurately predict the financial crisis of? 2008?"
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A macroeconomic reasoned judgment question.
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The Bureau of Economic Analysis calculates a number of different measures of inflation? -the GDP? Deflator, the Consumer Price? Index, the Wholesale Price? Index, etc.. Given? that, which of the following is an accurate description of the? question, "According to the Bureau of Economic? Analysis, what has been the average annual level of inflation? (as measured by the GDP? Deflator) over the past 10? years?":
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A macroeconomic factual question.
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The question? "Who has been hurt the worst by the deflation that Japan has experienced in recent? years?" is an example? of:
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A normative macroeconomic question.
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Which of the following is not a macroeconomics? question?
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Would legalization of marijuana nationwide result in a fall in the demand for ?cigarettes?
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Which of the following questions is not an example of a normative? question?
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What do I have to do if I want to increase the return to my ?investments?
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What is the relationship between the? question, "Does innovation lead to economic? growth?" and the question? "Should government encourage? innovation"?
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The first question is a positive? one; the second question is a normative one.
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In deciding whether to place economic sanctions on another country because of international political? conflicts, what are the macroeconomic? issues?
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There are macroeconomic issues for both countries such as the effect on the overall level of economic activity and unemployment.
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Which of the following is a macroeconomic? question?
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Would an increase in the minimum wage increase ?inflation?
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Suppose that you have just acquired a chemical manufacturing company and are trying to figure out what to produce. You talk to the plant manager and discover that the company can produce formaldehyde and sulfuric acid. You also find out that the maximum amount of formaldehyde that the company can produce in a month is 1 million liters if that is all it? produces, while the maximum amount of sulfuric acid it can produce in a month? (again assuming that is all it? produces) is 5 million liters. Given these? facts, take a sheet of paper and graphically represent the? company's production possibility frontier and label that frontier with the letter A. Now suppose that you invent a new process for manufacturing sulfuric acid that is more efficient so that you can produce more sulfuric acid than before but with the same amount of inputs. Given that? innovation, graphically represent the? company's new production possibilities frontier on the same graph you just drew and label that new frontier with the letter B. ? Finally, based on your graph? (do not turn in the? graph), which statement below most accurately describes your sketch of the frontiers A and B? (both their locations and their? shapes):
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Your sketch is based on both factual thinking and reasoned judgment thinking.
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What are the different ways in which apartments are allocated in? cities?
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By public housing authorities.
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Those who are willing to pay the most to get an apartment are most likely to get an apartment when they are allocated by? ____________.
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the market.
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You and your? friend, Jim, have just moved out of your dorm and into a new apartment. Both of you decide that you need to get a couch. Jim thinks you should get a new one from a furniture store nearby. You feel? that, given your? budget, it is best to buy a used one. Your other options are to buy one online or get a couch? custom-made at the same furniture store. How would you arrive at an optimal solution? here? Assume that your opportunity cost of time is? $5 per hour. You and Jim would need to consider? ___________.
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the direct costs and the indirect opportunity cost of your time required to shop.
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Since optimization is used to analyze? people's choices and help them improve the outcomes of their? choices, its
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both normative and positive.
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When making? decisions, economic analysis suggests that renters should optimize? by:
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doing a? cost-benefit analysis, including the opportunity cost of their time.
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Scarcity is key to this analysis as it results in a situation? where:
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society must have some mechanism to allocate scarce apartments to some renters and not others.
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Optimization is the process that describes? __________.
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the choices that households make.
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Optimization in levels examines? ___________, while optimization in differences analyzes? ____________.
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total net benefits of? alternatives; the change in net benefits.
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What is meant by comparative? statics? Explain with an example.
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A change in an? outcome, such as work?, that results from a change in a? factor, such as the wage.
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Suppose you had information on the sales of similar homes just east and just west of the boundary between two school districts. Also suppose schools on one side of the school boundary are better than the schools on the other side in terms of test scores. You could estimate the average value that parents place on a? one-point increase in test scores by? ___________.
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dividing the difference in the prices of similar homes between districts by the difference in test scores between districts.
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Economists mostly use optimization in? differences, as opposed to optimization in? levels, because? ____________.
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comparing different features of alternatives is intuitive.
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What is the difference between marginal values and average? values?
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Marginal values show the additional benefit or cost from consuming an additional unit of a? good, while average values are the benefit or cost per unit of a good.
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Refer to the optimization analysis used to make a decision about the choice of an apartment. Suppose the government in a certain country wants to reduce urban sprawl.? (Urban sprawl refers to the development of residential and commercial areas in the suburbs around the periphery of a city. One of the main problems with urban sprawl is that it leads to increased traffic congestion and air pollution as commuters travel to the city every? day.) What measures could it take to ensure that people choose to live closer to the central business? district?
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Tax traffic moving in and out of the city.
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Refer to the optimization analysis used to make a decision about the choice of an apartment. Suppose the government in a certain country wants to reduce urban sprawl.? (Urban sprawl refers to the development of residential and commercial areas in the suburbs around the periphery of a city. One of the main problems with urban sprawl is that it leads to increased traffic congestion and air pollution as commuters travel to the city every? day.) What measures could it take to ensure that people choose to live closer to the central business? district?
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Increase property taxes on house in the suburbs
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Determine if the following statements better describe optimization in levels or optimization in differences. John is attempting to decide on a movie. He determines that the new Batman movie provides him with? $5 more of a net benefit than the new Spiderman movie.
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Optimization in? differences, since he is calculating the change in net benefits between alternatives.
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Marcia finds that the net benefit of flying from Chicago to Honolulu on a? non-stop United Airlines flight is? $400, and the net benefit for the same trip flying on a? one-stop American Airlines flight is? $200.
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Optimization in? levels, since she is comparing the net benefits between alternatives.
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Nikki decided to take the first available parking space as she entered the student lot. She felt that the first available space had a? $5 premium compared with all other possible spaces since she did not want to risk being late for her exam.
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Optimization in? differences, since she is calculating the change in net benefits between alternatives.
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Reagan determined that the net benefit of taking the combination of two lecture courses and an online lecture course was? $100. The same three courses online gave her a net benefit of? $80, and all three in a? lecture-based format gave her a net benefit of? $90.
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Optimization in? levels, since she is comparing the net benefits between alternatives.
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The concept of opportunity cost would explain whether someone chooses to? drive, take a? cab, take a? bus, or walk to school or work because someone with? ___________.
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a high wage is more likely to drive or take a cab to work because his time is worth more.
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Consider the total cost of traveling from point A to point B. The cost of traveling by car would include the cost of gasoline and the opportunity cost of? time; the cost of hopping on a bus would include the bus ticket and the opportunity cost of time. Assume that the bus ticket costs less than the gasoline. Does this imply that using a bus to get to the destination involves lower total costs than getting there by? car? What if the bus? doesn't take the fastest route from point A to point? B?
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The marginal cost of using a bus may be higher if it takes more time than by car.
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Some people choose to live close to the city? center; others choose to live away from the city center and take a longer commute to work every day. Does this mean that those who stay away from the city center are being? irrational?
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No, because their opportunity cost of commuting must be lower.
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Assume that your? country's income tax structure has the following tax? rates: if your income is ?$30,000 or less you pay no income? tax; if your income is above ?$30,000?, you pay 40 percent of the amount above ?$30,000. And? so, for? example, someone who earns ?$60,000 would pay 40?% times ×?($60,000minus??$30,000?)equals=?$12,000. Your marginal tax rate is defined as the taxes you pay if you earn one more dollar. Your average tax rate is defined as the total taxes you pay divided by your income. And? so, to continue with this? example, someone who earns ?$60,000 would have a marginal tax rate of 40 percent and an average tax rate of $12,000/$60,000=20%. You have three alternatives. You could not work at? all, you could work half? time, or you could work full time. If you do not work at? all, you will earn? $0; if you work half time you will earn ?$30,000?; and if you work full? time, you will earn ?$60,000. Any time you do not? work, you can spend surfing. You love to? surf: surfing half time is worth ?$27,000 to you. As you are making your decision about how much to? work, should you pay attention to your average tax rate or to your marginal tax? rate?
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Marginal tax rate to identify marginal changes.
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Does the principle of optimization imply that people always make the best? choices?
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Yes, it is a good approximation for the decisions people make.
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There is a proverb? "anything worth doing is worth doing? well." Do you think an economist would agree with this? proverb?
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No, because the marginal cost of extra effort may be greater than the marginal benefit.
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Suppose you are accepted at all of the three business schools to which you applied. Consider all the factors that could matter when it comes to choosing a business school. How would you go about making an optimal decision about which school to? attend?
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By comparing the net benefits from attending the three schools.
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Suppose you have to give up a job that pays you? $40,000 a year to attend business school. How would this affect your calculation of whether to attend business? school?
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It will increase the indirect cost of your? time, making you less likely to attend business school.
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Which is not one of the Five Steps to Effective? Communication"?
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Assume your audience disagrees with you.
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Libertarianism:
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both of the above.
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Which of the following is not a standard for judging whether a positive frame of reference is a good? one?
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Brevity
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Which of the following is a reason economists use? mathematics:
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all of the above.
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his question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers In the second? paragraph, the article says that Raghuram Rajan? "describes the? Fed's policy as? 'expropriating responsible savers in favour of irresponsible? banks', and thinks it should raise rates? modestly." Given the content of the first two? paragraphs, which of the following statements is the most reasonable characterization of? Rajan's macroeconomic frame of? reference?
answer
?Rajan's frame of reference is a normative one based on some notion of fairness.
question
The? "right to the status? quo" is an example? of:
answer
a fairness norm
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers In the third? paragraph, the article describes the effects of monetary policy according to? standard, textbook? treatments, and notes that critics such as Einhorn and Rajan argue that this analysis no longer applies. Which of the following most accurately characterizes the nature of this? material?
answer
This paragraph employs a positive frame of reference perspective.
question
From a? critical-thinking perspective, what is the value of a general? (aka a? liberal) education?
answer
It provides a variety of perspectives that can be used in the future.
question
The standards by which one can judge whether a normative frame of reference is a good? one:
answer
are the same as the standards for judging how good a positive frame of reference is.
question
Which of the following is not an example of a normative frame or? reference?
answer
Macroeconomics
question
Which of the following is not an example of a positive frame or? reference?
answer
Efficiency
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers ?Overall, which statement best characterizes the frame of reference used by this? article?
answer
This article contains a complex argument in which positive frames of reference are used to establish what happens when interest rates are low and normative frames of reference are used to evaluate the desirability of the outcomes that were established using positive frames of reference.
question
Utilitarianism:
answer
both of the above.
question
What is the distinction between? cross-sectional data and? time-series data?
answer
?Cross-sectional data provides information about economic behavior at an instant in? time, while? time-series data provides information about how an economic variable behaves over time.
question
Which of the following is true about the use of mathematics in? economics?
answer
has limitations in economics.
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers The statement? , "There may be reasons to believe that monetary policy is less effective than it used to? be, but it is still doing more good than? harm." (last? paragraph) is:
answer
(a) and? (b) are both true.
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers In the second? paragraph, that article says that David Einhorm? "likens zero rates to an overdose of jam? doughnuts: too much of a good? thing." Given the content of the first two? paragraphs, which of the following statements is the most reasonable characterization of? Einhorn's macroeconomic frame of? reference?
answer
?Einhorn's frame of reference is a normative one based on some notion of efficiency or fairness.
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers The statement? , "[T]his has not been enough to suggest the shift of income from creditors to debtors is bad for? growth." (paragraph? 8) is:
answer
a positive one because it focuses on how growth changes without regard to whether that change is good or bad.
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers The discussion of the redistributive effects of lower interest rates? (paragraphs 4-7) involves in part an analysis of how people in different circumstances modify their behavior in the face of lower interest rates. It also involves making judgments about whether people are better off or worse off as a result of those changes in behavior. If we focus only on the analysis of how people change behavior as a result of lower interest? rates, we are focused? on:
answer
a positive issue because it deals with what? is, was, or will be without regard to whether that behavior is good or? bad, desirable or undesirable.
question
This question is based on the? article: Free Exchange? (2012, December? 1). The complex effects of low interest rates on consumption and investment. Retrieved from? http://www.economist.com/news/finance-and-economics/21567421-complex-effects-low-interest-rates-consumption-and-investment-savers The discussion of the redistributive effects of lower interest rates? (paragraphs 4-7) involves in part an analysis of how people in different circumstances modify their behavior in the face of lower interest rates. It also involves making judgments about whether people are better off or worse off as a result of those changes in behavior. If we focus only on making judgments about whether people are better off or worse off as aresult of those changes in? behavior, we are focused? on:
answer
a normative issue because it deals with making judgments based on some set of values.
question
Which of the following is not a characteristic of a? market?
answer
Markets are physical locations where trading occurs
question
Which of the following would not be considered a market by an? economist?
answer
All of the above are examples of a market.
question
Which of the following is not one of the five major factors that shifts the demand curve when it? changes?
answer
The price of the good itself
question
When one of the five major factors? changes, causing an increase in? demand, the demand curve shifts
answer
rightward
question
Suppose a new? off-campus university apartment complex could rent its rooms on the open market for? $900 a month. ?If, instead, the university chooses to cap the price of rooms to? $500 a month for? students, the result would be that? ____________.
answer
quantity demanded would exceed the quantity? supplied, resulting in a shortage.
question
Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the most? efficient?
answer
Auctioning the rooms to the highest bidders.
question
What is meant by holding all else equal and how is this concept used when discussing movements along the demand? curve?
answer
All variables that can affect the demand for the good are held constant.
question
Market demand is derived by? __________.
answer
fixing the price and adding up the quantities that each buyer demands.
question
Does the shape of the market demand curve differ from the shape of an individual demand? curve?
answer
No, they both tend to be? downward-sloping curves.
question
What does it mean to say that we are running out of? "cheap oil"?
answer
That oil reserves are becoming more expensive to find and extract over time.
question
What does this imply for the price of oil in the? future?
answer
The supply of oil will? decrease, which will lead to higher prices in the future.
question
The lowest price that a seller is willing to receive to sell an extra unit of a good is called willingness to accept ?, while the highest price that a buyer is willing to pay for an extra unit of a good is called willingness to pay. For a trade to take? place, a? buyer's willingness to pay must be? ____________.
answer
A and B only.
question
How would an increase in demand affect the equilibrium price in a? market?
answer
The equilibrium price increases.
question
How would the equilibrium price in a market be affected if there were a smalls increase in demand and a large increase in supply??
answer
The equilibrium price decreases.
question
How would the equilibrium price in a market be affected if there were a small decrease in demand and a large decrease in supply??
answer
The equilibrium price increase.
question
How would a decrease in supply affect the equilibrium price in a? market?
answer
The equilibrium price increases.
question
How would the equilibrium price in a market be affected if there were a small increase in supply and a large increase in demand?
answer
The equilibrium price increases.
question
How would the equilibrium price in a market be affected if there were a small decrease in supply and a large decrease in demand?
answer
The equilibrium price decreases.
question
Consider whether the Law of Demand holds in the following situations. The price of insulin injection kits?, used by diabetic patient?, increased from? $45 to? $52, but consumption has still remained the same. In this? situation, the Law of Demand? _________
answer
does not? hold, since the product sold is required for? survival, so increasing the price did not affect consumption.
question
The demand curve for insulin injection kits is? __________.
answer
near? vertical, since even if the price rises diabetics will be willing to buy the same quantity.
question
A drought in the grape regions of the country increases the cost of producing jelly. At the same? time, we see the price of peanut butter falls. Suppose that after both of these events the consumption of jelly is left unchanged. In this? situation, the Law of Demand? __________.
answer
?holds, since the demand curves for both jelly and peanut butter are? downward-sloping; it is their shifts that are determining the impact on the quantity consumed.
question
Lobsters are plentiful and easy to catch in August but scarce and difficult to catch in November. In? addition, vacationers shift the demand for lobsters further to the right in August than in any other month. Given this? information, we know that? _________ is/are higher in August than in other months.
answer
both supply and demand.
question
When comparing the equilibriums in the lobster market for August and? November, the equilibrium quantity is? ______ in November than in? August, while the equilibrium price is? ______.
answer
lower; higher,? lower, or unchanged.
question
As part of U.S. sugar? policy, the government offers to buy raw sugar from domestic sugarcane mills at a price of 18.75 cents per pound. This government offer is made for as much raw sugar as the sugarcane mills produce. Any raw sugar purchased by the government is not sold in the domestic? market, as this might cause raw sugar prices to fall. ?1.) Using the line drawing? tool, depict the? government's demand curve for sugar. Label your curve? 'D'. ?(Be sure to have your demand curve touch the ?y-axis.?) Carefully follow the instructions above and only draw the required object. Suppose conditions arise in the sugar market that would lead to a competitive equilibrium price that is below 18.75 cents per pound. In this? situation, sugar mills will? __________.
answer
not sell to private buyers at this lower price and will sell to the government? instead, which will drive up the domestic price until it reaches 18.75 cents per pound.
question
Which of the following is likely to lead to a right shift in the supply curve of? cotton?
answer
An increase in labor productivity due to training programs
question
Which of the following is likely to lead to an increase in the quantity supplied of? steel?
answer
A rise in the market price of steel
question
Land in? Sonoma, California, can be used to either grow grapes for pinot noir wine or to grow Gravenstein apples. Given this? information, what is the relationship between pinot noir wine and Gravenstein? apples?
answer
They share a common input.
question
The Law of Supply states? that, in most? cases, the quantity supplied of a good? ___________ when the price of the good rises. This means we would expect a typical supply curve to? be___________.
answer
rises; upward-sloping.
question
Which of the following factors is expected to cause the demand curve for coffee to shift to the? right?
answer
A higher tax on the sale of? tea, a substitute for coffee
question
Suppose people who are thinking about buying a home? (demanders in the housing? market) and current home owners who are thinking about selling their homes? (suppliers in the housing? market) suddenly believe that home prices are likely to be significantly higher next year than this year. Consider the market for housing this? year, as illustrated in the figure on the right. The change in the expected price of housing will? ___________.
answer
shift the demand curve to the right?, as buyers expedite their home purchases.
question
Other things remaining? same, a right shift in the demand curve will lead? to:
answer
an increase in the equilibrium price and the equilibrium quantity.
question
A fall in the price of? flour, used in making? cakes, is likely? to:
answer
increase the supply of cakes.
question
If Honda decided to increase the price of its Honda CRV SUV?, then the demand for the Toyota Rav4 SUV would? __________.
answer
Increase (shift right).
question
If widespread unemployment leads to a drop in incomes?, then the demand for the Toyota Rav4 SUV would? __________.
answer
decrease (shift left).
question
Are all markets perfectly? competitive?
answer
No, there are other market types where firms have considerable power to control the price.
question
In a perfectly competitive? market, sellers? _________ and buyers? _________.
answer
cannot charge more than the market? price; cannot pay less than the market price.
question
In a perfectly competitive? market, if one seller chooses to charge a price for its good that is slightly higher than the market? price, then it will? _________.
answer
lose all or almost all of its customers.
question
?Coca-Cola's decision to have vending machines raise prices in hot weather? _________ make? sense, since as a result of the change in demand for soft? drinks, the equilibrium quantity demanded? _________ and the equilibrium price companies can charge? _________.
answer
does; increases; increases.
question
Which of the following statements correctly describes perfectly competitive market? equilibrium?
answer
Deviations from equilibrium are temporary and equilibrium is automatically restored.
question
In the context of the? firm's supply? curve, as the firm produces more of a? good, the cost of producing each additional unit increases . This implies that the marginal cost of producing a good increases as it makes more of that good. The? firm's supply curve represents? ___________.
answer
the minimum price the seller is willing to accept to sell an extra unit of a good.
question
Assume that a worker in a technology firm can produce 3 circuit boards in an hour. Due to subsequent? innovation, he is now able to produce 6 circuit boards per hour. Other things remaining? constant, the? firm's supply curve is likely? to:
answer
shift to the right.
question
The concept of diminishing marginal benefits means that? __________.
answer
each additional unit consumed is worth less to you than the previous one.
question
The concept of diminishing marginal benefits holds true for goods that you like a lot. Suppose you have a flashlight that takes three batteries to power it. If you buy the batteries one at a? time, for which purchase will diminishing benefits set? in?
answer
When you buy the fourth battery.
question
Which of the following is not one of the four major factors that shifts the supply curve when it? changes?
answer
The income of consumers.
question
Read the story to the? right, and then answer the following? questions: Based on what happened at the Richmond? event, it is apparent that at a price of? $50, the quantity? _________ of laptops exceeded the quantity? _________. This resulted in an excess? _________ for laptops.
answer
demanded; supplied; demand
question
Which of the following ways of distributing the laptops would be more? efficient? ?(Check all that apply.?)
answer
A.Using flexible? prices, so those who value the laptop more would pay more for it. Your answer is correct. B.Auctioning off the laptops to the highest bidders. Your answer is correct. C.Using a random lottery to decide who gets the laptops.
question
The Thai government bought rice from its farmers at a price that was 40 percent higher than the prevailing market price in the country. How is this likely to affect other buyers in the domestic market for? rice?
answer
It will drive the price above the market? price, resulting in a higher price for domestic consumers and therefore a smaller quantity demanded.
question
Using the graph to the? right, the? government's plan to buy rice from farmers at? $7 will result in domestic consumers purchasing? ________ million tons and the government purchasing? _________.
answer
3; an excess supply of 4 million tons.
question
Other things remaining? same, a left shift in the demand curve will lead? to:
answer
a decrease in the equilibrium price and the equilibrium quantity.
question
An example of plagiarism? is:
answer
All of the above.
question
In developing a set of sources to? investigate:
answer
always use yourself to develop a theory to give you a more solid foundation for researching the work of others.
question
In searching for possible answers to macroeconomic? questions, the value of starting with yourself is that it? helps:
answer
both of the above.
question
Where would you look for information about what professional economists think about the macroeconomic issue you are? researching?
answer
EconLit
question
The Three Searching Strategy Rules? are:
answer
know the? question, figure out? what's needed to answer the? question, identify sources
question
The first step in searching for an answer to a macroeconomic question is? to:
answer
all of the above.
question
Where would you look for information about recent macroeconomic? events?
answer
The Economist
question
Critical? reading:
answer
is a method for more fully understanding the work of others.
question
What is a good source for macroeconomic data and? statistics?
answer
all of the above
question
Thinking critically about a macroeconomic issue? requires:
answer
?(b) and? (c)
question
?Brainstorming:
answer
is a method for figuring out what information needs to be gathered.
question
In searching for? answers, if the macroeconomic question is? vague:
answer
you can end up wasting a lot of time during the search process.
question
Which of the following is not one of the Five Steps to Reading? Critically?
answer
Determine the credentials of the author
question
Why is it important to keep good records of your? sources?
answer
All of the above
question
In? economics, the standard reference style is based? on:
answer
the American Psychological? Association's (APA) standards
question
Where would you look for basic or general information so that you can get oriented about a macroeconomic? issue?
answer
all of the above
question
What questions should you ask to determine if a source is? reliable?
answer
all of the above
