Q: Suppose the consumption function is given by $$C = 800 + 0.8W. If $$wage income ($$W) $$increases from $$2,500 to 5$$,000, what is the change in consumption ($$C$$)?

$$\Delta C = 0.8 \times (5,000 - 2,500) = 2,000$$

Q: Given the formula for an index number: $$\text{Value of index in any given period} = \frac{\text{Absolute value in given period}}{\text{Absolute value in base period}} \times 100$$, what is the index value if the absolute value in the given period is 150 and in the base period is 100?

$$\frac{150}{100} \times 100 = 150$$

Q: Refer to the formula for percentage growth rate: $$\frac{x_t - x_{t-1}}{x_{t-1}} \times 100. If $$violent crime increases from 1 to 2 incidents, what is the percentage growth rate?

$$\frac{2-1}{1} \times 100 = 100\%$$

Question 1

Which of the following is a normative statement?

Accepted Answer

The government should raise the tax on cigarettes to discourage people from smoking.

Question 2

What is the main difference between a theory and a model in economics?

Accepted Answer

A theory explains economic phenomena, while a model formalizes and describes the theory.

Question 3

Suppose the consumption function is given by $$C = 800 + 0.8W. If $$wage income ($$W) $$increases from $$2,500 to 5$$,000, what is the change in consumption ($$C$$)?

Accepted Answer

$$\Delta C = 0.8 	imes (5,000 - 2,500) = 2,000$$

Question 4

Which of the following best describes the concept of endogeneity in statistical analysis?

Accepted Answer

It means that the variable is produced from within the system being studied.

Question 5

Why do economists use index numbers when analyzing economic data?

Accepted Answer

To express variables relative to a base period, making comparisons easier.

Question 6

Given the formula for an index number: $$	ext{Value of index in any given period} = \frac{	ext{Absolute value in given period}}{	ext{Absolute value in base period}} 	imes 100$$, what is the index value if the absolute value in the given period is 150 and in the base period is 100?

Accepted Answer

$$\frac{150}{100} 	imes 100 = 150$$

Question 7

Which of the following statements about correlation and causation is correct?

Accepted Answer

Correlation does not imply causation.

Question 8

A responsible economist, when giving policy advice, should:

Accepted Answer

Clearly distinguish between normative and positive statements.

Question 9

Which of the following is NOT a characteristic of a good economic model?

Accepted Answer

It includes every detail of the real world.

Question 10

If a straight line has the equation $$Y = 2 + 3X$$, what is the slope of the line?

Accepted Answer

3

Question 11

Refer to the formula for percentage growth rate: $$\frac{x_t - x_{t-1}}{x_{t-1}} 	imes 100. If $$violent crime increases from 1 to 2 incidents, what is the percentage growth rate?

Accepted Answer

$$\frac{2-1}{1} 	imes 100 = 100\%$$

Question 12

Which of the following best describes a scatter diagram?

Accepted Answer

A graph showing the relationship between two variables, with each point representing a unit of observation.

Question 13

Why is it important to put data in per capita terms when analyzing economic statistics?

Accepted Answer

It allows for meaningful comparisons across populations of different sizes.

Question 14

Which of the following is an example of a non-linear function in economics?

Accepted Answer

A function where the slope changes as X changes, such as diminishing marginal response.

Question 15

If the annual cost of producing hockey sticks increases at an increasing rate as more are produced, this is an example of:

Accepted Answer

Increasing marginal cost.

Question 16

Which of the following is a potential problem when using survey data in economics?

Accepted Answer

Selection bias and manipulation.

Question 17

What is the main lesson from the quote 'There are lies, damned lies, and statistics'?

Accepted Answer

Statistics can be used to mislead if not interpreted carefully.

Question 18

Which of the following is a positive statement?

Accepted Answer

Government financial assistance to commercial banks is ineffective at preventing job losses.

Question 19

Why do economic models purposely omit many real-world details?

Accepted Answer

To focus on essential features relevant to the question or theory.

Question 20

Which of the following is a key takeaway when interpreting economic data?

Accepted Answer

Always check how the data is defined and displayed.

Economic Theories, Data, and Graphs: Foundations for Macroeconomic Analysis

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