ECON200 chapter 2 multiple choice

Economists make assumptions
to make the world easier to understand
If an economist develops a theory about international trade based on the assumption that there are only two countries and two goods
the theory can be useful in understanding the more complex world of involving many countries and goods
A circular-flow diagram is a model that
explains how the economy is organised
Factors of production are
inputs into the production process
In the simple circular-flow diagram, the decision makers consist of
households and firms
In the circular-flow diagram
households are sellers in the resource market
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Which of the following would NOT be considered a factor of production
money
In the goods and services market, households
are buyers and firms are sellers
In the factors of production market, households
are sellers and firms are buyers
the four sectors in a more complex circular-flow diagram include
households, firms, government and international trade
In economics, capital refers to
fixed assets used in the production process
An economic outcome is said to be efficient if the economy is
getting all it can from the scarce resources it has available
Which of the following concepts is illustrated by the production possibilities frontier
Efficiency
The curved shape of the production possibilities frontier can be explained by
increasing cost of production
Suppose a nation is currently producing at a point on its production possibilities frontier. We know that
the nation is producing an efficient combination of goods
When a production possibilities frontier shifts outward, it is demonstrating the concept of
economic growth
The field of economics is traditionally divided into two broad sub-fields
microeconomics and macroeconomics
Macroeconomics is the study of
economy-wide phenomena
Which of the following would be considered a topic of study in macroeconomics
The effect of an increase in the price of oil on the New Zealand inflation rate
A macroeconomist would study each of the following EXCEPT the
impact of minimum-wage laws on employment in the fast food industry
Which is the best statement about the roles of economists
In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers
Positive statements are best described as
descriptive, making a claim about how the world is
Normative statements are best described as
prescriptive, making a claim about how the world ought to be
Which of the following is an example of a positive statement
Prices rise when the government prints too much money
Which of the following is an example of a normative statement
Reducing tax rates on the wealthy would be good for the country
When economists are speaking as policy advisors, they are more likely to use
normative statements
When 2 variables have a negative correlation
they tend to move in opposite directions
A demand curve shows the relationship
between price and quantity demanded