Question 1

An index number is used to
A) compare the same variable in two different situations.
B) compare two different variables in two different situations.
C) designate a specific value for further reference.
D) compare two different variables in the same situation.
E) measure the absolute value of a variable.

Accepted Answer

Index numbers are used to compare the same variable in two different situations. This allows for analysis of changes over time or differences between groups.

Question 2

Which of the following is a normative statement?
A) Tuition fees should be waived for low-income students.
B) A free-trade agreement between two countries will result in an increase in trade.
C) The higher is the level of taxes, the higher are wage demands.
D) A reduction in export taxes on petroleum would result in higher wages.
E) The higher is the level of taxes, the lower is consumption spending.

Accepted Answer

A normative statement is a statement that expresses an opinion or value judgment about what should be. In this case, "tuition fees should be waived for low-income students" expresses a value judgment about what policy should be enacted.

Question 3

Which of the following statements is NOT correct?
A) Exposing them to empirical evidence can best test positive statements.
B) Economic statements cannot be tested because human decisions involve free will.
C) Economists test their theories by confronting the predictions of their theories with the evidence drawn from the real world.
D) Economic predictions will be fulfilled when their underlying hypotheses conform to actual human behaviour.
E) Normative statements cannot be tested by the scientific method.

Accepted Answer

This statement is incorrect. Economic statements can be tested using empirical evidence, even if human decisions involve free will. While it may be difficult to control all the variables in an economic situation, it is still possible to test economic theories using methods such as statistical analysis or experiments.

Question 4

A hypothesis (or a prediction) is a statement about
A) how assumptions affect theories.
B) what will happen in the future.
C) those things which we believe to be true, but cannot prove.
D) the relationship between facts explained by the hypothesis.
E) how two or more variables are related to each other.

Accepted Answer

A hypothesis is a statement about how two or more variables are related to each other. It is a proposed explanation for a phenomenon or observed behavior. It is usually tested through experiments or observations to determine whether the predicted relationship holds true.

Question 5

The table below shows hypothetical per-minute cell phone charges for "pay-and-talk" service over several years.  TABLE 2-2
-Refer to Table 2-2. Assume that 2005 is used as the base year, with the index number = 100.Which of the following series is the correct set of index numbers for the per-minute cell phonecharges from 2005 to 2009?
A) 1.0; 0.91; 0.73; 0.64; 0.45
B) 100; 91; 73; 64; 45
C) 0.55; 0.50; 0.40; 0.35; 0.25
D) 100%; 91%; 73%; 64% 45%
E) 55; 50; 40; 35; 25

Accepted Answer

The answer of The table below shows hypothetical per-minute cell...

Question 6

Economists build models that abstract from the complexities of reality because
A) economists do not understand the real world.
B) economists are not interested in reality.
C) it is easier to do so.
D) the complexities of reality are unimportant.
E) they believe they gain a greater understanding of reality.

Accepted Answer

Economists build models that simplify the real world to better understand key economic concepts and relationships. By focusing on key factors and abstracting from other factors, economists can make clearer predictions about what will happen in the real world.

Question 7

A positive statement is one that states
A) non-negative numbers.
B) what is desirable.
C) what is, was, or will be.
D) what is and what should be.
E) what should be but is not.

Accepted Answer

A positive statement is an objective statement that describes a fact or reality. Option C describes what is or what will be, rather than what should be or what is desirable.

Question 8

The statement that a two-percent increase in the money supply leads to a two-percent increase inthe price level is an example of a(n)
A) variable.
B) prediction.
C) normative statement.
D) model.
E) assumption.

Accepted Answer

The statement is a prediction because it is a hypothesis about the relationship between the money supply and price level. It is not an assumption because it is possible to test and verify the relationship, and it is not a normative statement because it is not based on opinion or value judgment. While it does involve variables and a model, those terms do not capture the specific nature of the statement.

Question 9

An economic theory requires, among other things,
A) a set of value judgments to interpret the empirical evidence.
B) a controlled laboratory setting in which the theory can be tested.
C) that the set of predictions be correct.
D) a set of definitions of the variables to be considered.
E) the use of endogenous variables only.

Accepted Answer

A theory must have well-defined and agreed-upon definitions for the variables being studied. While the other options may be important in some aspects of economic theory, they are not necessary requirements for a theory to exist.

Question 10

The table below shows hypothetical tuition costs at a Canadian university.  TABLE 2-1
-Refer to Table 2-1. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2007 is calculated as follows:
A) (5000/5100) × 100 = 98
B) (5100/5000) × 100 = 102
C) 5100/5000 = 1.02
D) 5100/5100 = 100
E) 5000/5100 = 0.98

Accepted Answer

To calculate the index number for 2007, we need to divide the tuition cost in 2007 by the tuition cost in the base year (2005) and then multiply by 100. Therefore, (5100/5000) x 100 = 102. This means that the tuition cost in 2007 is 102% of the tuition cost in 2005, or a 2% increase from the base year.

Question 11

Choose the answer that best explains why economists build models that abstract from the complexities of reality.
A) Because the complexities of reality are unimportant.
B) Because economists are not interested in reality.
C) Because this allows economists to conduct controlled experiments to test their theories.
D) Because they believe they gain a greater understanding of reality.
E) Because economics deals only in the abstract.

Accepted Answer

Economists build models that abstract from the complexities of reality because they believe they gain a greater understanding of reality by simplifying it and focusing on key variables and relationships.

Question 12

Suppose an individual wheat farmer's income is influenced by the region's average daily temperature. When examining the determinants of individual farmer income, the average daily temperature is a(n) variable.
A) flow
B) induced
C) dependent
D) endogenous
E) exogenous

Accepted Answer

The average daily temperature is an exogenous variable because it is determined outside the individual farmer's control and affects their income. It is not an endogenous variable because it is not influenced by the individual farmer's decisions. It is not a flow variable because it is a single value at a point in time, not a measure of a quantity over time. It is not an induced variable because it is not a result of a change in another variable. It is not a dependent variable in this context because it is not being determined by the individual farmer, but rather is a factor affecting their income.

Question 13

On a coordinate graph, what is the X intercept of the function
A) -60
B) 0
C) 60
D) -20
E) 20

Accepted Answer

The X-intercept of a function is the point where the graph crosses the x-axis, which occurs when the y-value is zero. Without the specific function equation, we cannot determine the exact x-intercept, but based on the given options, 60 is the most likely candidate for the x-intercept.

Question 14

The table below shows hypothetical tuition costs at a Canadian university.  TABLE 2-1
-Refer to Table 2-1. The increase in tuition from 2005 to 2009 is:
A) 4 percent.
B) 100/5000.
C) 200.
D) 0.04 percent.
E) 200/5200.

Accepted Answer

The answer of The table below shows hypothetical tuition costs...

Question 15

What is the best way to display the unemployment rate in each of the world's developed economies in 2009?
A) a scatter diagram with two variables
B) a cross-sectional graph with time-series data
C) a cross-sectional bar chart graph
D) a scatter diagram
E) a time series line graph

Accepted Answer

The answer of What is the best way to display...

Question 16

A theory
A) can only be tested with a controlled experiment.
B) is designed to explain and predict what we observe.
C) is used to impose order on the world.
D) assumes definitions for variables.
E) enables one to make prophesies about the future.

Accepted Answer

A theory is designed to explain and predict what we observe, based on existing evidence and knowledge. It is not necessarily tested through a controlled experiment, although evidence may be gathered through various means. The purpose of a theory is to bring order and understanding to the world around us, and it assumes definitions for variables to make accurate predictions and explanations. Though it may allow for predictions about the future, this is not necessarily its primary function.

Question 17

The slope of a straight line is necessarily
A) negative.
B) zero.
C) positive.
D) constant.
E) increasing as one moves up the line.

Accepted Answer

The slope of a straight line is defined as the change in y divided by the change in x. This value is constant for a straight line, which means that the answer is D - constant. While a straight line can have a negative or positive slope depending on whether it is sloping downwards or upwards, or a zero slope if the line is horizontal, these are not necessarily true for all straight lines. Therefore, the best answer is D. Additionally, the slope does not necessarily have to increase as one moves up the line, so E is also not a correct answer.

Question 18

An economic theory
A) will be useful only if all human behaviour is rational.
B) will be useful as long as it is logically consistent.
C) is only useful if its underlying assumptions are realistic.
D) will predict more accurately if it contains a greater number of mathematical equations.
E) must be judged on its ability to explain and predict real-world phenomena.

Accepted Answer

The answer of An economic theory
A) will be useful only...

Question 19

Suppose there is a theory that several things influence the price of fish in Halifax, one of which isthe weather during the fishing season. When examining the determinants of the price of fish, theweather is
A) a stock, as it influences the quantity of fish caught.
B) an endogenous variable, as it influences the price of fish.
C) an endogenous variable, as it is determined within the theory.
D) an exogenous variable, as it is determined outside the theory.
E) an act of God and, therefore, has no legitimate connection with the theory.

Accepted Answer

The answer of Suppose there is a theory that several...

Question 20

Economic theories
A) can be used to help explain and predict economic behaviour.
B) cannot be tested because we cannot do economic "experiments".
C) must apply to all economies to be true.
D) are not useful because of the unrealistic assumptions they contain.
E) cannot help to predict future behaviour.

Accepted Answer

Economic theories are designed to explain and predict economic behavior. While it may not be possible to conduct economic experiments in the same way that scientific experiments are conducted, theories can still be tested against real-world data. While it is important to understand the limitations of economic models and theories, they can still provide valuable insights and predictions about economic behavior. Economic theories do not necessarily have to apply to all economies to be useful, as they may be more relevant or useful in certain contexts. Finally, while some economic theories may incorporate unrealistic assumptions, this does not necessarily render them useless, as they may still provide insights into economic behavior in certain contexts.

Quiz 2: Economic Theories, Data, and Graphs

An index number is used to

Which of the following is a normative statement?

Which of the following statements is NOT correct?

A hypothesis (or a prediction) is a statement about

Economists build models that abstract from the complexities of reality because

A positive statement is one that states

The statement that a two-percent increase in the money supply leads to a two-percent increase inthe price level is an example of a(n)

An economic theory requires, among other things,

The table below shows hypothetical tuition costs at a Canadian university. TABLE 2-1 -Refer to Table 2-1. Assume that 2005 is used as the base year, with the index number = 100. The value of the index number in 2007 is calculated as follows:

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

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

On a coordinate graph, what is the X intercept of the function

The table below shows hypothetical tuition costs at a Canadian university. TABLE 2-1 -Refer to Table 2-1. The increase in tuition from 2005 to 2009 is:

What is the best way to display the unemployment rate in each of the world's developed economies in 2009?

A theory

The slope of a straight line is necessarily

An economic theory

Suppose there is a theory that several things influence the price of fish in Halifax, one of which isthe weather during the fishing season. When examining the determinants of the price of fish, theweather is

Economic theories