Exam 1

Ceteris paribus

A Latin phrase that means while certain variables change, "all other things remain unchanged."

Capital

A human-made good used to produce other goods and services

Model

A simplified description of reality used to understand and predict the relationship between variables

Normative economics

An analysis based on value judgement

Positive economics

An analysis limited to statements that are verifiable

Land

Any natural resource provided by nature that is used to produce a good or service

Resources

Basic categories of inputs used to produce goods and services

A conditional statement such as "if event A occurs, then B follows" is an example of normative economics.

False

A nominative economic statement can be proven either true or false.

False

An analysis of IBM'S pricing decisions would be classified as a macroeconomic study.

False

Economic models are of limited use since they cannot be tested empirically with actual data.

False

Factors which determine the price of corn would be studied in macroeconomics.

False

Microeconomics only looks at the behavior of one consumer or one firm in a market, while macroeconomics looks at the behavior of an entire industry or group of consumers.

False

Money is one of our nation's resources (factors or means of production).

False

Policies to determine the price of troll dolls are a concern of Macroeconomics.

False

Scarcity has no importance to understanding economics.

False

The statement "American workers are lazy" is an example of positive economic analysis.

False

Your scarcity problem would disappear if you were rich.

False

Microeconomics

The branch of economics that studies decision making by a single individual, household, firm, industry, or level of government

Macroeconomics

The branch of economics that studies decision making for the economy as a whole

Scarcity

The condition in which human wants are forever greater than the avaliable supply of time, goods, and resources

Entrepreneurship

The creative ability of individuals to seek profits by taking risks and combining resources to produce innovative products

Labor

The mental and physical capacity of workers to produce goods and services

Economics

The study of how society chooses to allocate it's scarce resources to the production of goods and services to satisfy unlimited wants

A positive economic statement must be verifiable.

True

A positive economic statements simple describes what is.

True

Abstracting from reality is an important element of all economic models.

True

Economics could be defined as the study of scarcity.

True

Economics is the study of people making choice faced with the problem of unlimited wants and limited resources.

True

Macroeconomics studies economy wide issues like inflation and unemployment.

True

Microeconomics and macroeconomics use different types of analysis.

True

The Ceteris paribus assumption is important when building economic models.

True

The statement "cutting government spending is the best way to boost consumer confidence" is an example of normative economics.

True

The statement "it is better to suffer a little more unemployment than a little lower price" is an example of normative economic analysis.

True

The statement "it would be better to put up with price controls than to have continuing higher medical care prices" is an example of normative economic analysis.

True

All human wants cannot be satisfied because of the problem of scarcity.

True.