Chapter 2 review macroeconomics

it is impossible to produce more of one good without producing less of the other.

An economy's production of two goods is efficient if - the opportunity cost of producing more of one good is zero. - it is impossible to produce more of one good without producing less of the other - .all members of society consume equal portions of the goods. - the goods are produced using only some of society's available resources.

inputs.

Another term for factors of production is - inputs - .output - .goods. - services.

true

Assumptions can simplify the complex world and make it easier to understand. True False

focus their thinking on the essence of the problem at hand.

Economists make assumptions to - focus their thinking on the essence of the problem at hand. - mimic the methodologies employed by other scientists. - minimize the number of experiments that yield no useful data. - minimize the likelihood that some aspect of the problem at hand is being overlooked.

economists have different values and scientific judgments.

Economists sometimes give conflicting advice because - graduate students in economics are encouraged to argue with each other. - economics is more of a belief system than a science. - economists acting as scientists do not like to agree with economists acting as policy advisers. - economists have different values and scientific judgments.

the factors of production, households are buyers and firms are sellers.

In the circular-flow diagram, in the markets for - goods and services, households are buyers and firms are sellers. - the factors of production, households and firms are both buyers. - goods and services, households and firms are both sellers - .the factors of production, households are buyers and firms are sellers.

gather data from historical episodes of economic change.

Instead of conducting laboratory experiments to generate data to test their theories, economists often - assume that data would support their theories. - ask winners of the Nobel Prize in Economics to evaluate their theories. - gather data from historical episodes of economic change. - argue that data is impossible to collect in economics.

One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption because it will cause households to save more.

Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement? - One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions. - One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. - One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption because it will cause households to save more. - One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets.

the nation is not using all available resources or is using inferior technology or both.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that - the nation is producing an efficient combination of goods - .the nation is not using all available resources or is using inferior technology or both. - the nation is producing beyond its capacity, so inflation will occur. - there will be a large opportunity cost if the nation tries to increase production of any good.

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

The bowed-outward shape of the production possibilities frontier can be explained by the fact that - economic growth is always occurring. - all resources are scarce. - the only way to get more of one good is to get less of the other. - the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

people face trade-offs.

The production possibilities frontier provides an illustration of the principle that - trade can make everyone better off. - people respond to incentives - .people face trade-offs. - governments can sometimes improve market outcomes.

performing an experiment in an economic system.

The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in - formulating theories about economic events. - performing an experiment in an economic system. - applying mathematical methods to economic analysis. - analyzing available data.

Universal healthcare would be good for U.S. citizens.

Which of the following is an example of a normative, as opposed to a positive, statement? - An increase in the cigarette tax would cause a decrease in the number of smokers. - Universal healthcare would be good for U.S. citizens. - A decrease in the minimum wage would decrease unemployment. - A law requiring the federal government to balance its budget would increase economic growth.

Prices rise when the government prints too much money.

Which of the following is an example of a positive, as opposed to normative, statement? - Prices rise when the government prints too much money. - Welfare payments should be increased because they lead to a better world for everyone. - When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency. - Decreasing inflation should be a top priority since inflation is more harmful to the economy than unemployment.

Models assume away irrelevant details.

Which of the following statements about models is correct? - Models cannot be used to make predictions. - Models cannot be used to explain how the economy functions. - The more details a model includes, the better the model. - Models assume away irrelevant details.

Publish theories before testing them

Which of the following steps does an economist not take when studying the economy? - Publish theories before testing them - Devise theories - Analyze data - Collect data