Who said, “The whole of science is nothing more than the refinement of everyday thinking”?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. Isaac Newton2. Albert Einstein3. Benjamin Franklin4. Sigmund Freud

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1 2 3 4

25% 25%25%25%

1. 35 barrels and no bathtubs.2. no barrels and 16 bathtubs.3. 20 barrels and 12 bathtubs.4. This economy would not choose to put all

of its resources into the production of one good.

Refer to Figure 2-8. If this economy puts all of its resources into the production of bathtubs it could produce

A macroeconomist would study each of the following EXCEPT the

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. effect of changes in saving rates on GDP.

2. effect of tax policy on the rate of economic growth.

3. impact of monetary policy on the rate of inflation.

4. impact of minimum-wage laws on employment in the fast food industry.

A normative statement describes how the world

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. is.2. will be in the future.3. ought to be.4. was in the past.

The President of the United States receives tax policy advice from economists in the

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. Congressional Budget Office.

2. Federal Reserve.3. Department of

Treasury.4. Department of

Justice.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. The more coffee a person drinks per day, the longer he can go without sleep.

2. There is no relationship between how much coffee per day a person drinks and how long they can go without sleep.

3. The relationship between cups of coffee per day and time without sleep is too unpredictable to consider.

4. The less coffee a person drinks per day, the more time he can go without sleep.

Refer to Figure 2-9. What would you say about the relationship between coffee and hours without sleep?

1 2 3 4

25% 25%25%25%

Which of the following is a correct statement about slope?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. A horizontal line has a zero slope, and a vertical line has an infinite slope.

2. A horizontal line has a slope of 1, and a vertical line has a slope of -1.

3. A horizontal line has an infinite slope, and a vertical line has a zero slope.

4. None of the above are correct.

Bill has noticed that increases in unemployment insurance claims are associated with recessions, and therefore advocates limits on unemployment insurance so as to prevent recessions. Martha has noticed that most drug addicts once attended schools, and therefore advocates getting rid of schools so as to prevent drug addiction.

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. The reasoning of both Bill and Martha suffers from the reverse causality problem.

2. Bill’s reasoning suffers from the reverse causality problem and Martha’s reasoning suffers from the omitted variable problem.

3. Martha’s reasoning suffers from the reverse causality problem and Bill’s reasoning suffers from the omitted variable problem.

4. The reasoning of both Bill and Martha suffers from the omitted variable problem.

Which of the following is NOT true concerning models?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. Models assume away irrelevant details.

2. Models can explain how the economy is organized.

3. Models cannot be used to make predictions.

4. Models simplify reality.

Factors of production are

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. used to produce goods and services.

2. owned by firms.3. abundant in most

economies.4. used by both firms

and households.

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. B2. D3. A4. C

Refer to Figure 2-1. Which arrow shows the flow of spending by households?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. the government.2. firms.3. households.4. All are correct.

Refer to Figure 2-2. Factors of production are owned by

The curved shape of the production possibilities frontier can be explained by

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. economic growth.2. scarcity.3. increasing cost of

production.4. constant cost of

production.

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. E2. B3. D4. A

Refer to Figure 2-3. Which point represents the maximum possible production of tubas?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. 5 toothbrushes.2. 10 toothbrushes.3. zero, since the economy has

the additional resources to produce 10 additional toasters.

4. 20 toothbrushes.

Refer to Figure 2-4. The opportunity cost in terms of toothbrushes of getting 10 additional toasters by moving from point B to point A is

When an economy is operating inside its production possibilities frontier we know that

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. to produce more of one good, the economy would have to give up some of the other good.

2. moving to a point on its production possibilities frontier would be economic growth.

3. the economy is operating with efficiency.

4. there are unused resources or inefficiencies in the economy.

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. an increase in resources necessary to produce capital goods

2. an increase in unemployment3. an improvement in the technology

of producing consumer goods4. an increase in the overall level of

technology in the economy

Refer to Figure 2-7. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. there would be no gain in either bathtubs or barrels.

2. it still would not be producing efficiently.

3. It is not possible for this economy to move from point C to point E without additional resources.

4. it would be producing more barrels and more bathtubs than at point C.

Refer to Figure 2-8.. If this economy moved from point C to point E,

Microeconomics is the study of

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. the behavior of consumers.

2. how individual households and firms make decisions.

3. how the economy as a whole works.

4. how government affects the economy.

Which of the following would be considered a topic of study in macroeconomics?

1 2 3 4

25% 25%25%25%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41 42 43 44 45 46 47 48 49 50

1. the effect of an increase in the price of imported coffee beans on the U.S. coffee industry

2. the effect of an increase in the price of imported oil on the U.S. inflation rate

3. the impact of agricultural price support programs in the cotton industry

4. the effect on U.S. steel producers of an import quota imposed on foreign steel