Chapter 2- Macroeconomics
(Question about going to the doctor correlating to life expectancy.) Using the concept of a natural experiment, which of the following statements is true about the scenario?
This is a decent natural experiment.
Which of the following examples do you provide as a normative question?
Should welfare be repealed?
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group.
A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model incorrect?
No, because it predicts the outcome of increased bus ridership on average.
Which of the following is the best example of causation (versus correlation)?
Oil prices go up and gasoline prices go up.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better
Give an example of a pair of variables that have negative correlation.
The number of winter coats sold and the temperature outside.
How do economists distinguish between models that work and those that don't?
They test their models against real-world data
Causation occurs when there is ____________.
a logical cause-and-effect relationship
Debbie's method is a _______ and Troy's method is a ________.
controlled experiment, natural experiment
The length of women's skirts and stock market performance is likely to be _______.
correlation
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask ___________ and normative questions ask _________.
what is or what will be, what ought to be
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on customers' gasoline purchasing habits when they notice price increases. You suggest that the team _____________.
design and execute an experiment
More _________ and _____ employment levels is likely to be __________.
economic growth, higher, causation
The ________ implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
human capital argument
Group A is the _________ and Group B is the _________.
treatment group, control group
The mean quantity of coffee produced is _______ tons.
248
Suppose country A has five families. Their incomes are $11,000, $20,000, $31,000, $41,000, and $50,000. Country A's median income is ______ and its mean income is _________.
$31,000 and $30,600
Suppose country A has five families. Their incomes are $11,000, $20,000, $31,000, $41,000, and $150,000. Country A's median income is ______ and its mean income is _________.
$31,000 and $50,600
Which of the following do you provide as a positive question?
How much is the national debt?
How would you test this model?
You should run a natural experiment by analyzing bus ridership and price changes.
To say that economists use the scientific method means that they are using ___________.
an ongoing process to develop models of the world and then test and evaluate those models
There is a ______ correlation between GPD and gasoline prices.
negative
More ____ and ____ crime rates is likely to be _________.
police officers, lower, causation
There is a ______ correlation between oil prices and gasoline prices.
positive
The _______ implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates.
signaling argument
He is still unconvinced about the reliability of using economic models to make business decisions. You can answer this concern by sharing that you will confirm the accuracy of the model by ________ with ______________.
testing its predictions, empirical data.
Assume that both mean and median incomes are $40,000 in 2000 and that median income remains constant through 2010. 1.) Using the line drawing tool, draw a line representing median income from 2000 to 2010. Label your line appropriately. 2.) Using the line drawing tool, draw a line for mean income to represent a rising degree of income inequality over time. Label your line appropriately.
(For the graph make both lines start at 40. Have one continue straight on the 40 until 2010 and label it Median. Have the other increase from 40 and label it Mean. It doesn't matter how much the mean increases to, it just has to increase.)
The 2012 crop has increased over the 2009-2011 mean by _______ percent.
13.23
The mean quantity of coffee that Brazil produced from 2009 to 2011 is ______ tons
2,682,587
The 2012 crop is ____ percent larger.
25.00
Country _____ has greater income inequality.
B
Your client becomes critical of your "sloppy" technique of using a model that does not include all factors. What is the most appropriate reply to this criticism?
Economic models are meant to be approximations that predict what happens in most circumstances.
Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. During a meeting with your client, the CEO asks if your economic models include all factors that impact gasoline prices. What is your response to his question?
No, the model is a simplified representation of reality.
Your client has asked you to plot GDP and gasoline prices on a graph.
Plot points in a line (17, 2.75) (16.9, 3) (16.8, 3.25) (16.7, 3.5)
Your client has asked you to plot crude oil prices and gasoline prices on a graph
Plot points in a line (80, 2.75) (90, 3) (100, 3.25) (110, 3.5)
Suppose you thought income inequality in the United States had increased over time. Based on your answers to this question, would you expect the ratio of the mean income in the United States to the median income has risen or fallen? Explain.
Risen, because means change more with extreme values.
The cause, or independent variable, should be plotted on the ________ and the effect, or dependent variable, should be plotted on the _________.
x-axis, y-axis
There is a _____ correlation between mustaches grown and gasoline prices.
zero