chapter 2: true of false Flashcards
Economic models must mirror reality, or they are of no value
FALSE, ECONOMIC MODELS ARE SIMPLIFICATIONS OF REALITY
assumptions make the world easier to understand because they simplify reality and focus our attention
T
the payment from firms to households for the use of the factors of production are wages, interest, and profits
F; THE PAYMENTS ARE WAGES, RENT AND PROFIT
the factors of production that households sell to firms are labour, land and capital
T
if an economy is operating on its production possibilities frontier, it must be using its resources efficiently.
T
If an economy is operating on its PPF, it must produce less of one good if it produces more of another
T
points outside the PPF are attainable but inefficient
F; POINTS OUTSIDE THE PPF CANNOT YET BE ATTAINED
if an economy were experiencing substantial unemployment, the economy is producing inside the PPF
T
The PPF is bowed outward because the tradeoffs between the production of any two goods are constant
F; IT IS BOWED OUTWARD BECASEU THE TRADEOFFS ARE NOT CONSTANT BUT ARE INCREASING
an advance in production technology would cause the production possibilities curve to shift outward
T
Macroeconomics is concerned with the study of how households and firms make decisions and how they interact in specific markets
F; MACROECONOMICS IS THE STUDY OF ECONOMY-WIDE PHENOMENA
the statement, An increase in inflation tends to cause unemployment to fall in the short run is normative
F; THIS STATEMENT IS POSITIVE
when economists make positive statements, they are more likely to be acting as scientists
T
Microeconomics and Macroeconomics both use the same set of economic models
F; EACH FILED HAS ITS OWN SET OF MODELS
Most economists agree that agricultural subsidies should be enhanced
F; MOST ECONMISTS AGREE THA TAGRICULTURAL SUBSIDIES SHOULD BE ELIMINATED
