Econ Ch 2

Macroeconomics is concerned with the study of how households and firms make decisions and how they interact in specific markets.

False

Normative statements can be refuted with evidence.

False

Points outside the production possibilities frontier are attainable but inefficient.

False

The production possibilities frontier is bowed outward because the trade-off between the production of any two goods is constant.

False

The statement, "An increase in inflation tends to cause unemployment to fall in the short run" is normative.

False

Which of the following statements regarding the circular-flow diagram is true?

The factors of production are owned by households.

Positive statements are

statements of description that can be tested.

In making which of the following statements is an economist acting more like a scientist?

A reduction in unemployment benefits will reduce the unemployment rate.

Which of the following will not shift a country's production possibilities frontier outward?

A reduction in unemployment.

Economic models are

Built with assumptions.

Points on the production possibilities frontier are

Efficient.

An advance in production technology would cause the production possibilities curve to shift outward.

False

Economic models must mirror reality or they are of no value.

False

It is reasonable to assume that the world is composed of only one person when modeling international trade

False

Which of the following statements is normative?

The unemployment rate should be lower.

Assumptions make the world easier to understand because they simplify reality and focus our attention.

True

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

True

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

True

If an economy were experiencing substantial unemployment, the economy is producing inside the production possibilities frontier.

True

Most economists believe that tariffs and import quotas usually reduce general economic welfare.

True

When economists make positive statements, they are more likely to be acting as scientists.

True

When people act as scientists, they must try to be objective.

True

Which of the following issues is related to microeconomics?

the impact of oil prices on auto production.