Question 1

Suppose we have data for 1000 students for a period of one year.The data show that those students who spend more hours studying have a higher grade point average (GPA).We can say that

Accepted Answer

The data shows a positive correlation between hours of study time and GPA, meaning that as one increases, the other tends to increase as well. However, this does not necessarily imply causation, as there may be other factors influencing both study time and GPA. Therefore, answer choices A, B, and D cannot be conclusively inferred from the given data. Answer choice C implies causation, but this cannot be confirmed without further analysis.

Question 2

Choose the answer that best explains why economists build models that abstract from the complexities of reality.

Accepted Answer

Economists build models that simplify reality because they believe it leads to a better understanding of the underlying mechanisms driving economic behavior. By isolating specific variables and relationships, economists can focus on testing specific theories and better understand the causal relationships among different economic factors. This is not because the complexities of reality are unimportant or because they are not interested in reality, but rather because abstraction allows economists to more effectively study and analyze economic behavior. Controlled experiments are not always possible in economics, as it is often difficult or impossible to manipulate variables in the same way as in other scientific disciplines.

Question 3

When an economist assumes that the owners of firms are motivated only by the desire to maximize profits,the economist most likely believes that

Accepted Answer

The assumption that owners of firms are motivated only by the desire to maximize profits is a simplification made by economists to create useful models and theories. Descriptive accuracy of the assumption is not relevant as long as the theory built on it produces useful and accurate predictions.

Question 4

When using statistics in economics,the possibility of error

Accepted Answer

It is impossible to completely eliminate the possibility of error in statistical analysis because data is always subject to variation and measurement error. However, researchers can try to minimize error through careful data collection and analysis, and by acknowledging and accounting for uncertainty in their results.

Question 5

An economic model that contains a highly realistic set of assumptions is

Accepted Answer

Economic models with highly realistic sets of assumptions often become too complex and particularized, making them less useful for general application or understanding broad economic principles. Simplified models, despite less realistic assumptions, can be more effective in illustrating core economic concepts and trends.

Question 6

Which of the following pairs of words have similar meanings?

Accepted Answer

The answer of Which of the following pairs of words...

Question 7

A hypothesis (or a prediction)is a statement about

Accepted Answer

The answer of A hypothesis (or a prediction)is a statement...

Question 8

Economists build models that abstract from the complexities of reality because

Accepted Answer

Economists build models that abstract from the complexities of reality because they believe they gain a greater understanding of reality. By simplifying a complex system, economists can isolate key variables and relationships, allowing them to build a more manageable and intuitive model of the underlying phenomenon. This is particularly useful in economics, where the interactions between different variables and agents can often be difficult to understand without careful analysis.

Question 9

Suppose that a particular theory predicts that on Monday,Wednesday,and Friday the stock market will rise and that on Tuesday and Thursday the stock market will fall.If an economist tests this theory and finds that over a six-month period the theory predicts accurately,the economist would likely say that the theory

Accepted Answer

The theory's accurate predictions over a six-month period indicate that it is consistent with observed outcomes, but this does not prove the theory correct beyond all doubt, nor does it necessarily speak to its reliability, seriousness, or usefulness in the face of irrational behavior.

Question 10

The scientific approach to economic inquiry involves

Accepted Answer

Testing predictions with empirical data is a fundamental aspect of the scientific approach in economics, as it allows for the validation or refutation of theoretical models based on observed evidence.

Question 11

Of the following,which is the most important characteristic of a successful theory?

Accepted Answer

The most important characteristic of a successful theory is that it allows us to predict behavior reasonably accurately. While all other options may be desirable, they are not necessary for a theory to be successful. In fact, it is impossible for a theory to never be refuted or for all assumptions to be true. The goal of a theory is not to explain all economic behavior, but rather to offer a simplified model that can be used to make predictions and inform decisions.

Question 12

In order to test a theory,one must

Accepted Answer

Testing a theory requires confronting its predictions with evidence through experimentation, observation, or other forms of testing. This determines whether the predictions hold true, and in turn, whether the theory is supported or challenged.

Question 13

A scientific prediction is

Accepted Answer

A scientific prediction is a conditional statement that involves cause-and-effect relationships. It suggests that if a certain condition (A) is met, then a certain outcome (B) will occur. This differs from a prophesy, which is more of a speculative statement about the future, and not based on empirical evidence or logical reasoning.

Question 14

Suppose economists at the Department of Finance in Ottawa employ an economic model that predicts the effects of an increase in the GST.After implementation of the change,researchers find that the empirical data is in conflict with the theory.They are likely to

Accepted Answer

If the empirical data is in conflict with the theory, it is necessary to modify the theory in light of the new evidence. This is a crucial step in ensuring that the economic model accurately predicts the effects of changes in policy. Ignoring the evidence or rejecting it as faulty would be irresponsible and could lead to inaccurate policy decisions. Modifying the prediction to fit the data or modifying the data to suit the definitions and assumptions would also be inappropriate as it would compromise the integrity of the research.

Question 15

Choose the statement that best characterizes an economic theory.An economic theory

Accepted Answer

An economic theory is a set of assumptions and logical reasoning used to explain how economies behave. Its value lies in its ability to explain and predict real-world phenomena, rather than whether its assumptions accurately reflect reality or whether it contains a certain number of mathematical equations. While logical consistency is important, it is not sufficient on its own to make a theory valuable. Similarly, the assumption of rational behavior is often used in economic models, but it is not a necessary condition for a theory to be useful.

Question 16

Economics is scientific because

Accepted Answer

The answer of Economics is scientific because
...

Question 17

Suppose an individual wheat farmerʹs income is influenced by the regionʹs average daily temperature.When examining the determinants of individual farmer income,the average daily temperature is a(n)variable.

Accepted Answer

The average daily temperature is an external factor that is not determined by the individual farmer's actions, making it an exogenous variable.

Question 18

Suppose economists at the World Bank develop a theory with a prediction that increased levels of foreign aid lead to increases in per capita GDP in the recipient developing countries.They find empirical evidence that is consistent with this theory.The economists are able to conclude that

Accepted Answer

Even though the economists have found empirical evidence that is consistent with their theory, it is important to subject the theory to continued scrutiny. There may be other factors that could have led to the observed relationship, and it is important to rule out alternative explanations. Additionally, it is possible that the relationship may not hold in all cases or over time, so continued analysis is necessary. Therefore, choice A is the best option.

Question 19

Suppose economists at the World Bank discover a positive correlation between family income and female education levels in developing countries.We can say that

Accepted Answer

The positive correlation between family income and female education levels in developing countries is consistent with a theory that an increase in female education levels causes an increase in family income. This is because educated women are more likely to enter the workforce, earn higher wages, and have fewer children, all of which can contribute to an increase in family income. On the other hand, it is less likely that an increase in family income would cause an increase in female education levels, as families may prioritize other expenses over education, and there may be cultural or logistical barriers to accessing education. It is important to note, however, that correlation does not prove causation, and further research would be needed to establish a causal relationship between these two variables.

Question 20

If we seek to explain the number of seats sold on a particular air route,say Toronto to Halifax,over a one -year period,we would consider many variables.Which of the following variables would be endogenous to our theory?

Accepted Answer

The number of airline seats sold on this route is the variable we are trying to explain, so it is endogenous to our theory. The other variables listed are either exogenous (not influenced by our theory) or potentially correlated, but not the main focus of our analysis.

Quiz 2: Economic Theories, data, and Graphs

Suppose we have data for 1000 students for a period of one year.The data show that those students who spend more hours studying have a higher grade point average (GPA) .We can say that