Deck 2: Economic Methods and Economic Questions

Question 1

Which of the following statements is true of the scientific method?

A) The scientific method may not reveal a "true" model of the world.
B) The scientific method does not require the models to be tested with data.
C) The scientific method used by economists and scientists is independent of empiricism.
D) The scientific method can help develop accurate models even when data are unavailable.

Answer 1

The scientific method may not reveal a "true" model of the world.

Question 2

Which of the following is a feature of the scientific method?

A) The scientific method is not based on data, statistics, or measurements.
B) The scientific method allows improvisation and correction of inconsistent models.
C) The scientific method enables the creation of perfectly accurate models of the real world.
D) The scientific method is used only for studying topics related to economics.

Answer 2

The scientific method allows improvisation and correction of inconsistent models.

Question 3

Which of the following statements is true?

A) Models that economists use are perfect replicas of reality.
B) The scientific method used by economists is based on idealism and not empiricism.
C) Models help economists explain the past but do not help predict the future.
D) Testing with data enables economists to distinguish between good models and bad models.

Answer 3

Testing with data enables economists to distinguish between good models and bad models.

Question 4

What is meant by the term "scientific method?" What are the key components of the scientific method?

Question 5

Economic models are often based on assumptions because they ________.

A) help explain the past
B) help simplify complex real-world phenomena
C) help predict the future with greater accuracy
D) help test models even when relevant data are unavailable

Question 6

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent.
Refer to the scenario above.The hypothesis of the model is that ________.

A) college graduates will earn about 80 percent more than high school graduates
B) college graduates will earn about 107 percent more than high school graduates
C) college graduates will earn about 200 percent more than high school graduates
D) college graduates will earn about 275 percent more than high school graduates

Question 7

The scientific method refers to the process by which economists and other scientists ________.

A) collect data for further use in research
B) develop models of the world and test those models with data
C) develop models to explain the past but not to predict the future
D) plot graphs to illustrate relationships between different economic variables

Question 8

A model's predictions are referred to as ________.

A) statistics
B) theories
C) hypotheses
D) empirical evidence

Question 9

Which of the following statements correctly differentiates between a model and a hypothesis?

A) Testing a hypothesis does not require data, whereas testing a model requires data.
B) Testing a model requires data, whereas testing a hypothesis does not require data.
C) A hypothesis can be used to make predictions for the future, whereas a model can only explain the past.
D) A model is a simplified representation of reality, whereas hypotheses are a model's predictions.

Question 10

Facts,measurements,or statistics that describe the world are referred to as ________.

A) data
B) models
C) hypothesis
D) empiricism

Question 11

Which of the following statements is true?

A) Theories are statistics that describe the real world.
B) Hypotheses are predictions that can be tested with data.
C) Data are facts established by observation and measurement.
D) Empirical evidence consists of facts, measurements, or statistics that describe the world.

Question 12

Which of the following is a feature of models?

A) Models are the same as hypotheses.
B) Models help in making predictions for the future.
C) Models are more complicated than real life phenomena.
D) Models are as complex as the phenomenon being studied.

Question 13

A model refers to ________.

A) a perfect replica of reality
B) a simplified description, or representation, of reality
C) facts, measurements, or statistics that describe the world
D) a set of facts established by observation and measurement

Question 14

Which of the following statements is true of models?

A) The predictions of a model are referred to as data.
B) A model is formulated after developing a hypothesis.
C) Models are always based on assumptions that are known to be true.
D) It is more important for a model to be simple and useful than to be precisely accurate.

Question 15

Which of the following statements is true about data?

A) Empiricism does not necessarily involve data.
B) Consistency of models can be checked using data.
C) Facts that describe the world are not considered data.
D) Convincing data analysis in economics relies on using a small sample.

Question 16

Why do almost all models begin with assumptions?

Question 17

Why are data essential components of the scientific method?

Question 18

Empirical evidence refers to ________.

A) a simplified representation of reality
B) a proposed explanation for a phenomenon
C) the process of developing and testing models
D) a set of facts established by observation and measurement

Question 19

A model ________.

A) is often based on simplifying assumptions that are not necessarily true
B) can be tested without data or statistics
C) is a more complex representation of reality than a theory
D) can never be used to predict the future, but it helps explain the past

Question 20

Empiricism refers to using ________ to analyze the world.

A) data
B) beliefs
C) traditions
D) value judgments

Question 21

An economic model suggests that an additional year of education increases a student's future wages by 15 percent.Using this model,answer the following questions.
a)Gary completes 8 years of education,and John completes 9 years of education.If Gary earns $20 per hour,how much is John expected to earn?
b)John completes 9 years of education,and Kevin completes 12 years of education.Given John's earnings (as calculated in part a),how much is Kevin expected to earn?
c)Is there any limitation to such a model? Explain your answer.

Question 22

The following table shows the monthly wages of five different individuals.

Refer to the table above.What is the average monthly wage?

A) $450
B) $558
C) $612
D) $650

Question 23

The average income of 25 employees working in a firm is $1,754 per month.What is the total income of all the employees?

A) $40,000
B) $43,850
C) $56,225
D) $63,950

Question 24

The mean of a data set is the ________.

A) product of all values divided by the number of values
B) sum of all different values divided by the number of values
C) sum of all different values multiplied by the number of values
D) difference between the highest value and the lowest value

Question 25

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent.
Refer to the scenario above.Which of the following statements is true about the model?

A) The model is not based on any assumption.
B) The predictions of the model will hold for every individual.
C) The model describes the economic payoff of more education.
D) The model can be applied for a maximum of 10 years of additional education.

Question 26

Which of the following is a key property of models?

A) All economic models begin with assumptions.
B) Empiricism is not essential for testing models.
C) All models can be used for a limited time only.
D) All models are consistent and do not make incorrect predictions.

Question 27

An economic model suggests that for every additional year of education,an individual's future wages increase by 5 percent.If Richard,with 12 years of education,earns $20 per hour,how much will he earn per hour if he decides to undertake 4 additional years of education?

Question 28

In country X,the average yearly salary of 50-year-olds with 16 years of education is $50,275,while the average yearly salary of 50-year-olds with 12 years of education is $36,265.According to these data,4 additional years of education are likely to be correlated with higher future wages of about ________.

A) 24 percent
B) 38 percent
C) 50 percent
D) 88 percent

Question 29

In a hypothetical country,the average wage of five 40-year-old citizens with a college education is $36,896,and the average wage of five 40-year-old citizens with a high school education is $25,864.What is the returns-to-college education in the country? Is there any limitation of this analysis? Explain your answer.

Question 30

Which of the following statements is true about the mean of a series?

A) The mean is equal to zero when all the values are identical.
B) The mean is a commonly used technique for summarizing data.
C) The mean is less than all the individual observations in the data set.
D) The mean is calculated as the sum of all values multiplied by the number of values.

Question 31

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent.
Refer to the scenario above.Which of the following statements is true about the model's prediction?

A) The prediction cannot be verified empirically.
B) The prediction is precise, exact, and accurate for the entire population.
C) The prediction is an approximate relationship and may not hold for everyone.
D) The prediction can be applied to estimate the returns only for a limited number of years of additional education.

Question 32

A local swimming club enrolled thirty-five new members during the current year and charged each member a onetime membership fee of $200.What is the total membership fee collected by the club from the new members this year?

A) $1,750
B) $2,000
C) $7,000
D) $3,500

Question 33

The following table shows the monthly wages of five different individuals.

Refer to the table above.The average monthly wage of the five workers is ________.

A) $600
B) $450
C) $440
D) $0

Question 34

Annie,Darwin,Dorothy,Christian,and Isabella are five college students who work as part-time bartenders.If their average weekly earnings is $100,then their total weekly earnings is ________.

A) $500
B) $400
C) $250
D) $700

Question 35

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent.
Refer to the scenario above.Which of the followings statements is true of the model?

A) The predictions of this model can be verified empirically.
B) The predictions of this model can only be applied for a limited number of years of additional education.
C) According to the model, 2 additional years of education will increase an individual's future wages 1.20 times.
D) According to the model, 2 additional years of education will increase an individual's future wages 2.98 times.

Question 36

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent.
Refer to the scenario above.Which of the following statements is true of the model?

A) The predictions of this model cannot be tested with data.
B) The predictions of this model are accurate and will hold for all individuals.
C) The predictions of this model can be applied to unlimited years of additional education.
D) The model predicts that two additional years of education is likely to increase future earnings by 60 percent.

Question 37

What are the two important properties of all models?

Question 38

Which of the following implies that a model is an approximation?

A) The model is not based on any assumption.
B) The predictions of the model are mostly wrong.
C) The predictions of the model will hold in most cases but not all.
D) The predictions of the model cannot be tested with data.

Question 39

The weights of six students in the seventh grade are 120 lbs,110 lbs,105 lbs,100 lbs,96 lbs,and 90 lbs.The average weight of the six students is ________.

A) 105 lbs.
B) 103.5 lbs.
C) 100 lbs.
D) 95 lbs.

Question 40

Public-use data refer to ________.

A) data that have to be purchased from an external agent
B) data that are available to anyone who wants to use it
C) data published by the government only during political campaigns
D) data collected by a researcher only through field investigation

Question 41

Which of the following statements is true?

A) Correlation can only arise when causation is not present.
B) Causation can only arise when correlation is not present.
C) Correlation arises when there is causation and can also arise when there is no causation.
D) Causation arises when there is correlation between two variables and can also arise when there is no correlation.

Question 42

Which of the following relationships is likely to exhibit a negative correlation?

A) The relationship between the amount saved with a bank and the interest earned
B) The relationship between the level of professional training and unemployment
C) The relationship between inflation in the United States and traffic congestion in China
D) The relationship between the amount of precipitation in a year and the number of umbrellas sold

Question 43

A correlation between two variables implies that ________.

A) there is a cause-effect relationship between the two variables
B) it is impossible to measure one variable without measuring the other
C) there is a mutual relationship between both the variables
D) when one variable changes, the other variable always changes by exactly the same amount

Question 44

Data show that in 2012,the college enrollment in Lithasia increased.In the same year,the sale of hot dogs in Lithasia also increased.The relationship between college enrollment and the sale of hot dogs exhibits ________.

A) a zero correlation
B) a causal relationship
C) a positive correlation
D) a negative correlation

Question 45

When two variables move in the same direction,they are said to be ________.

A) uncorrelated
B) equivalent
C) positively correlated
D) negatively correlated

Question 46

Which of the following relationships is most likely to exhibit zero correlation?

A) The relationship between income and savings
B) The relationship between education and income
C) The relationship between wind velocity and the rotational speed of wind turbines
D) The relationship between the amount received as unemployment benefits in China and the unemployment rate in Canada

Question 47

An omitted variable is a variable that ________.

A) is purposely left out as it does not aid an economic analysis
B) does not cause other variables in a study to change when it changes
C) is removed from a study as it can lead to the problem of reverse causality
D) has been left out, and if included, would explain why the variables considered in a study are correlated

Question 48

Zero correlation between two variables implies that ________.

A) both variables move in the same direction
B) the variables are not related to each other
C) both variables move in the opposite direction
D) change in one variable causes the other to change

Question 49

Which of the following pairs of variables is likely to be positively correlated?

A) Income and consumption
B) Price and consumption
C) Education and unemployment
D) Availability of health care and death rate

Question 50

The following table displays the marks obtained by three students on an economics test.

a)Calculate the mean marks obtained by the three students.
b)Suppose one of the scores was reported incorrectly.Charles scored 38 instead of 83.How will the mean change if the correction is incorporated?
c)How does the amount of data used affect the accuracy of a model?

Question 51

Which of the following arguments based on anecdotes is most likely to be incorrect?

A) Increased government spending lowers the unemployment rate in an economy but can lead to inflation.
B) Based on a local survey of a small town, it was argued that greater opportunities to work from home are the prime cause of obesity among the elderly workforce in the country.
C) The average annual earnings of high school dropouts in the United States was much less than that of graduates in 2015.
D) A health survey of preschoolers in Mexico showed that the average height of preschoolers is between 3.5 feet and 4 feet.

Question 52

A variable is a factor that ________.

A) cannot be measured
B) is not affected by changes in other factors
C) is independent and cannot be determined
D) takes different values at different points of time

Question 53

________ occurs when the direction of cause and effect is mixed up in a study.

A) Adverse causality
B) Reverse causality
C) Omitted variable bias
D) Limited information bias

Question 54

Causation occurs when ________.

A) two variables tend to move in the same direction
B) two variables tend to move in opposite directions
C) a change in one variable is the reason for a change in another variable
D) a change in one variable does not cause any change in another variable

Question 55

Which of the following statements is true?

A) Empirical arguments can be supported without the use of data.
B) Using a large data set will strengthen the force of an empirical argument.
C) Using fewer observations will strengthen the force of an empirical argument.
D) The number of observations used does not affect the strength of an empirical argument.

Question 56

When two variables move in opposite directions,they are said to be ________.

A) uncorrelated
B) positively correlated
C) negatively correlated
D) equivalent

Question 57

Which of the following statements is true?

A) Arguments based on anecdotes are always true.
B) In the scientific method, anecdotes are more important than data.
C) Arguments by example are appropriate when contradicting a blanket statement.
D) It is easier for a researcher to jump to a wrong conclusion when she uses a large data set.

Question 58

Which of the following is most likely to be an example of causation?

A) The crime rate is high in a country. The literacy rate is high as well.
B) A firm producing compact fluorescent light bulbs installs new machinery. Their per-day production of light bulbs increases.
C) A soccer player scores four goals when he wears red socks. He concludes that the red socks helped him score the goals.
D) A student wins money by scratching a ticket with a particular coin. He decides to scratch all tickets with the same coin in the future.

Question 59

To judge a statistical relationship,should a researcher rely on a small sample or a large sample? Explain your answer.

Question 60

Which of the following statements identifies a difference between correlation and causation?

A) Correlation occurs when one thing directly affects another, whereas causation implies a mutual relationship between two things.
B) Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another.
C) A causal relationship exists between two variables when they are correlated, but correlation does not necessarily exist if there's a causal relationship between two variables.
D) Causation cannot arise when correlation is present, and correlation cannot arise when causation is present.

Question 61

Randomization is the assignment of subjects by ________ to a ________.

A) chance, rather than by choice; treatment group or to a test group
B) choice, rather than by chance; treatment group or to a test group
C) choice, rather than by chance; treatment group or to a control group
D) chance, rather than by choice; treatment group or to a control group

Question 62

A survey recently indicated that being happy at work tends to make workers more productive.What can be a possible error of this conclusion?

Question 63

A natural experiment is an empirical study ________.

A) in which the predictions of the model are not required to be tested with data
B) that can only be used to understand natural phenomena and is widely used in subjects such as physics and biology
C) in which the researcher assigns subjects to the control and treatment groups to verify a cause-effect relationship
D) in which some process, outside the control of the experimenter, has assigned subjects to the control and treatment groups in a random or nearly random way

Question 64

To test the effectiveness of a newly developed medicine,300 patients suffering from a heart ailment were divided into two groups of 150 people each.One group was treated with the new medicine,while the other was treated with an already existing,widely used medicine.In this scenario,identify the treatment group and the control group.What is the rationale behind dividing patients into two groups?

Question 65

It has been observed in country X that with an increase in college enrollment over a period of 6 years,the demand for televisions has also increased.Would it be right to conclude that the increase in college enrollment has caused the increase in demand for televisions? Why or why not?

Question 66

A researcher wants to test the effects of daily meditation on the stress levels of individuals.She divides the participants randomly into a treatment group and a control group and conducts an experiment.She pays for meditation classes for half of the subjects,and the other half does not join the class.Which of the following statements is true of the two groups in this experiment?

A) The participants in the treatment group are assigned by chance, whereas the ones in the control group are assigned by choice.
B) The participants in the control group are assigned by chance, whereas the participants in the treatment group are assigned by choice.
C) The treatment group is the group of subjects that receives payment from the researcher for meditation classes; the control group is the group that does not.
D) The control group is the group of subjects that receives payment from the researcher to join the meditation class; the treatment group is the group that does not.

Question 67

What are the problems with experimentation?

Question 68

Which of the following is NOT a problem associated with randomized experiments?

A) Experiments can sometimes get expensive for the researcher.
B) The participants in the treatment group and the control group are not identical in all respects.
C) Getting immediate answers to some important questions may not be possible.
D) Sometimes experiments are conducted poorly, which may lead to inaccurate results.

Question 69

What is meant by the term "omitted variable" in correlation analysis? Explain with an example.

Question 70

Does correlation always imply causation? Why or why not? Explain with the help of real-life examples.

Question 71

To conduct a randomized experiment,researchers usually classify the participants into a ________.

A) study group and a control group
B) treatment group and a test group
C) study group and a treatment group
D) treatment group and a control group

Question 72

Reverse causality can create confusion between correlation and causation.What does reverse causality imply?

Question 73

Which of the following statements is true?

A) Randomization is not used in medical experiments.
B) Randomization allows for the classification of participants according to their choice.
C) The subjects in the treatment group and the control group of an experiment are identical in all respects and they are treated identically.
D) The subjects in the treatment group and the control group of an experiment are treated identically, except along a single dimension.

Question 74

In research,what is the importance of experiments? What is meant by randomization in experiments?

Question 75

What are the three categories of correlation? Illustrate with real-life examples.

Question 76

Which of the following is an example of a natural experiment?

A) A laboratory research on the effectiveness of solar power as an alternative source of fuel
B) A research on the effectiveness of a new medicine among some voluntary participants
C) A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries
D) A study on the benefits of regular exercise by paying for the membership fees at fitness clubs for one-half of the participants

Question 77

State the type of correlation between the following sets of variables.
a)Consumption and income
b)Education and unemployment
c)Availability of health care and death rate
d)Pollution control measures adopted in Canada and the number of cases of respiratory diseases in Australia

Question 78

Which of the following claims is most likely to suffer from reverse causality?

A) Higher income increases consumption.
B) Relatively wealthy people tend to be relatively healthy.
C) More hours of study are likely to lead to better results.
D) Crime rate is seen to be lower in countries having a higher level of poverty.

Question 79

Which of the following is a feature of experiments?

A) Experiments are restricted to laboratories.
B) Experiments are carried out only in the study of economics.
C) Experiments help determine cause and effect between variables.
D) Experiments require the division of participants into a treatment group and a test group.

Question 80

An experiment refers to ________.

A) a simplified representation of some real-life phenomenon
B) the process of collecting, measuring, and organizing data
C) validating the claims of a model using statistics and facts
D) a controlled method of investigating causal relationships among variables