Homework 1

A model or theory in economics is:
built using relevant observations, assumptions, and abstractions
An example of a positive statement is:
slow growth in GDP will raise real unemployment
Positive statement
a statement that can be tested
What is a business cycle?
the economy’s pattern of fluctuations in economic activity; expansion followed by contraction and then by expansion
A hypothesis is an assertions that can be:
proven to be false
Economists are:
concerned with developing theories and interested in solving problems
The problem of scarcity is confronted by:
all societies
What are the three fundamental economic questions?
What, How, and For Whom?
The three fundamental questions of economics exist because:
scarcity
A simplified representation of a particular problems is a:
model
Three broad types of factors of production are:
capital, labor, and natural resources
Macroeconomics is most likely to be concerned with:
inflation and unemployment
Statements that make value judgments are:
normative
Normative statements are:
subjective and value based
The study of how people choose among alternatives that are available to them is called:
economics
Many disagreements between economists occur because:
economists sometimes make normative statements
Unemployment and inflation are:
major topics in macroeconomics
A person who seeks to earn profits by finding ways to organize factors of production is called a(n):
entrepreneur
A tradeoff between two economic goals means that:
if you achieve more of one, you will achieve less of the other
Whenever a choice is made:
the opportunity cost of that choice is the highest-valued other choice that could have been made
In a command socialist economy:
resources are government owned and government exercises broad power over their use
Economic resources used in the production process are called:
factors of production
Capital is best considered as:
a factor of production that has been produced
The circular flow is a model of the:
flow of goods, services, and payments between households and businesses
Macroeconomics deals with:
the determinants of aggregate output, overall levels of prices and inflation, growth, etc.
The statement “There is no such thing as a free lunch” means:
any production requires the use of scarce resources, and thus the sacrifice of another alternative
Economics is a:
social science concerned chiefly with how people choose among alternatives
An answer to the question “For whom?” determines:
who gets the goods and services produced
An example of a normative statement is:
A high rate of economic growth is good for the country
Ceteris paribus means:
all other things unchanged
The best example of a market capitalist economy is:
the United States
The basic concern of economics is:
to study the choices people make
The fundamental economic questions that every economic system must answer are:
what, how, and for whom?
A key theme fundamental to all of economics is:
people have unlimited wants facing limited means to satisfy them
Factors of production are:
the resources the economy has available to produce goods and services
A feature that distinguishes economists’ approach to making choices is (are):
assigning opportunity costs a major role in their analyses of choices, assuming individuals make choices to maximize objectives, and emphasizing that choices are made at the margin
Scarcity in economics means:
not having sufficient resources to produce all the goods and services we want
The answer to “What goods are to be produced?” deals with:
the kinds and quantities of goods and services produced
In a market capitalist economy:
factors of production are owned privately and decisions about their use are basically made by individuals
Statements that are a hypothesis or a statement of fact are:
positive
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