Chapter 2 Thinking Like an Economist

1. Economists, like mathematicians, physicists, and biologists,

• a. make use of the scientific method.

• b. try to address their subject with a scientist’s objectivity.

• c. devise theories, collect data, and then analyze these data in an attempt to verify or refute their

  theories.

• d. All of the above are correct.

Tags

CCSS.RI. 9-10.2

CCSS.RI.11-12.2

CCSS.RL.11-12.2

CCSS.RL.8.2

CCSS.RL.9-10.2

2. The scientific method is applicable to studying

• a. natural sciences, but not social sciences.

• b. social sciences, but not natural sciences.

• c. both natural sciences and social sciences.

• d. None of the above is correct.

3. Which of the following is not correct about most economic models?

• a. They are composed of equations and diagrams.

• b. They contribute very little to economists’ understanding of the real world.

• c. They omit many features of the real-world economy.

• d. In constructing models, economists make assumptions.

4. The circular-flow diagram is an example of

• a. a laboratory experiment.

• b. an economic model.

• c. a mathematical model.

• d. All of the above are correct.

5. Which of the following statements about the circular-flow diagram is correct?

• a. One must imagine that the economy operates without money in order to make sense of the diagram.

• b. The diagram leaves out details that are not essential for understanding the economic transactions

  that occur between households and firms.

• c. The government cannot be excluded as a decision maker in a circular-flow diagram.

• d. All of the above are correct.

6. In the simple circular-flow diagram, who consumes the goods and services that firms produce?

• a. households only

• b. firms only

• c. both households and firms

• d. neither households nor firms

7. In the markets for goods and services in the circular-flow diagram,

• a. households and firms are both buyers.

• b. households and firms are both sellers.

• c. households are buyers and firms are sellers.

• d. households are sellers and firms are buyers.

8. Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent

• a. firms and households.

• b. households and government.

• c. the markets for goods and services and the markets for financial assets.

• d. the markets for goods and the markets for services.

9. Refer to Figure 2-2. If the owners of land, labor, and capital are represented by Box B of this circular-

flow diagram, then

• a. households are represented by Box A.

• b. firms are represented by Box C.

• c. firms are represented by Box A.

• d. firms are sellers in Box B.

10. Refer to Figure 2-1. Which arrow represents the flow of income payments?

• a. A

• b. B

• c. C

• d. D