Chapter 2

Question 1

An economic model is…

Answer 1

A simplified representation of some aspect of the economy

Question 2

The circular Flow-diagram illustrates that, in markets for the factors of production,

Answer 2

Household are sellers, and firms are buyers

Question 3

A point inside the production possibilities frontier is…

Answer 3

Feasible but not efficient

Question 4

All of the following topics fall within the study of microeconomics except…

Answer 4

The influence of the government budget deficit on economic growth.

Question 5

Which of the following is a positive, rather than a normative, statement?

Answer 5

Law X will reduce national income.

Question 6

The following parts of government regularly rely on the advice of economists:

Answer 6

-Department of treasury

-office of management and budget

-Department of Justice

Question 7

Economists may disagree because they have different…

Answer 7

-Hunches about the validity of alternative theories

-judgements about the size of key parameters

-political philosophies about the goals of public policy

Question 8

Most economists believe that tariffs are..

Answer 8

A poor way to raise general economic well-being.