Macroeconomics 1.3 Studyguide – Flashcards

1) Economic models A) make no assumptions in order to remain as accurate as possible. B) are simplified versions of reality. C) can not be used to analyze real-world issues. D) magnify the complexity of economic issues in order to provide useful data.

2) Which of the following is part of an economic model? A) assumptions B) norms C) opinions D) preferences of economic agents

3) Which of the following statements about positive economic analysis is true ? A) Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. B) There is much less disagreement among economists over normative economic analysis than over positive economic analysis. C) There is much more disagreement among economists over positive economic analysis than over normative economic analysis. D) Unlike positive economic analysis, normative economic analysis can be tested

4) Which of the following is a positive economic statement? A) Everyone should live at the same standard of living. B) If the price of gasoline rises, a smaller quantity of it will be bought. C) The government should close income tax loopholes. D) U.S. firms should not be allowed to outsource production of goods and services.

5) Which of the following is a positive economic statement? A) People should not buy imported fruits and vegetables. B) The government should subsidize solar power for homeowners. C) The minimum wage law causes unemployment. D) The number of work visas should not be limited by the government.

6) Which of the following is a normative economic statement? A) Rising global demand for diesel and heating oil has led to increases in the price of crude oil. B) With falling home prices and rising mortgage interest rates, the amount of foreclosures has increased. C) The federal government is considering raising the gasoline tax to promote the use of public transportation. D) Fashion designers should be allowed to copyright designs to promote innovation.

7) Which of the following is a normative economic statement? A) The price of milk is too high. B) The current high price of milk is the result of reduced worldwide supply. C) When the price of milk rises, the quantity of milk purchased falls. D) When the price of milk rises, the cost of milk-based products rises

8) All of the following questions or statements regarding medical school are positive except: A) How do changes in expected future incomes affect the decisions of medical students about which specialty to choose? B) Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care. C) What role does tuition play in a studentȇs decision about whether to attend medical school? D) Have tuition increases had a large effect or a small effect on the number of applications to medical school?

9) The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage: a. The minimum wage law causes unemployment. b. Unemployment would be lower without a minimum wage law. c. Minimum wage laws benefit some workers and harm others. d. The minimum wage should be more than $7.25 per hour. Which of the consequences above are positive statements and which are normative statements? A) a, b, and c are positive statements and d is a normative statement. B) a and b are positive statements, c and d are normative statement. C) Only a is a positive statement, b, c and d are normative statements. D) a and c are positive statements, b and d are normative statements.

10) Which of the following is part of an economic model? A) preferences of economic agents B) data C) norms D) opinions

11) Which of the following is a positive economic statement? A) The inflation rate in the United States is too high. B) Unemployment insurance payments increase when the unemployment rate rises. C) The government should defund Obamacare. D) States should be able to enact their own marijuana legalization laws.

12) Which of the following is a positive economic statement? A) People should use public transportation more often. B) The government should ban diesel engines in automobiles. C) Due to a decrease in state funding, university tuition has risen. D) Foreign citizens should not be allowed to work without a work visa.

13) Which of the following is a normative economic statement? A) Falling global demand for pesticides has led to decreases in the price of pesticides. B) With falling mortgage rates and falling unemployment rates, the number of new homes being built has increased. C) The state of Floridaȇs unemployment rate dropped when several large companies relocated to the Miami area. D) Global warming should be at the top of every economic agenda.

14) Which of the following is a normative economic statement? A) Tobacco products should be banned in all public spaces. B) The increase in tobacco taxes has caused an increase in the price of cigarettes. C) Better awareness of health risks has decreased tobacco use. D) A reduction in tobacco subsidies has caused the price of tobacco to increase.

15) ȈA decrease in the price of digital cameras will decrease the demand for camera film.ȈȱThis statement is an example of a positive economic statement.

16) ȈThe distribution of income should be determined by the governmentȈȱis an example of a normative economic statement

17) Policies based on normative economic ideas tend to increase economic efficiency and improve equity.

18) ȈAn increase in the price of oranges will increase the demand for grapefruits.ȈȱThis statement is an example of a normative economic statement.

19) The unemployment rate is too high is an example of a positive economic statement.

20) Normative analysis is concerned withȱȈwhat ought to be,Ȉȱwhile positive analysis is concerned withȱȈwhat is.Ȉ

21) What are the five steps by which economists arrive at a useful economic model?

22) What is an economic variable? Give an example of an economic variable.

23) Which of the following are positive economic statements and which are normative economic statements? a. An increase in the minimum wage causes unemployment. b. The government should raise the minimum wage above $7.25 per hour. c. The prolonged recession has caused the unemployment rate to reach a 30 -year high. d. Interest rates need to be lower for the economy to emerge from the recession. e. Inflation has decreased since the onset of the recession. f. Once the recession has ended, interest rates should increased to assure that inflation does not go up.