Q: Which of the following is the correct formula for calculating an index number for a given period?

$$\text{Index} = \frac{\text{Absolute value in given period}}{\text{Absolute value in base period}} \times 100$$

Question 1

Which of the following statements is a normative statement?

Accepted Answer

The government should increase spending on healthcare.

Question 2

An economist claims, 'If the price of gasoline rises, people will buy less gasoline.' This is an example of:

Accepted Answer

A positive statement

Question 3

Which of the following best describes the difference between endogenous and exogenous variables in economic theory?

Accepted Answer

Endogenous variables are explained within the theory, while exogenous variables are determined outside the theory.

Question 4

Suppose an economist observes that ice cream sales and drowning incidents both increase in the summer. This is an example of:

Accepted Answer

Positive correlation

Question 5

Which of the following is the correct formula for calculating an index number for a given period?

Accepted Answer

$$	ext{Index} = \frac{	ext{Absolute value in given period}}{	ext{Absolute value in base period}} 	imes 100$$

Question 6

A theory predicts that an increase in income leads to an increase in consumption. Which of the following best describes the relationship between income and consumption?

Accepted Answer

They are positively related.

Question 7

If a straight line on a graph has a slope of $$-2$$, what does this indicate about the relationship between the two variables?

Accepted Answer

As one variable increases, the other decreases by 2 units.

Question 8

Which of the following best explains why economists often cannot conduct controlled experiments?

Accepted Answer

It is difficult to isolate variables in real-world economic environments.

Question 9

A scatter diagram is most useful for:

Accepted Answer

Showing the relationship between two variables for multiple observations.

Question 10

Suppose the consumption function is given by $$C = 800 + 0.8W$$, where $$C is $$consumption and $$W is $$wage income. If wage income increases by $1000, what is the change in consumption?

Accepted Answer

$$0.8 	imes 1000 = 800$$

Question 11

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

Accepted Answer

Correlation does not necessarily imply causation.

Question 12

If a function is non-linear, what does this imply about the slope?

Accepted Answer

The slope changes as the value of the independent variable changes.

Question 13

A time-series graph is best used to:

Accepted Answer

Display how a variable changes over time.

Question 14

Which of the following is an example of a cross-sectional data set?

Accepted Answer

Average house prices in each Canadian province in 2021.

Question 15

If the slope of a line representing the cost of pollution reduction is $$-0.5$$, what does this mean in practical terms?

Accepted Answer

For every 2 unit increase in pollution reduction, the cost decreases by 1 unit.

Question 16

Which of the following best describes the scientific approach in economics?

Accepted Answer

Testing theories by confronting their predictions with empirical evidence.

Question 17

A function with a minimum point on its graph represents:

Accepted Answer

A point where the function reaches its lowest value before increasing again.

Question 18

Why do economists use index numbers such as the Consumer Price Index (CPI)?

Accepted Answer

To compare the value of a variable relative to a base period.

Question 19

Which of the following is a key reason why economists use models and theories?

Accepted Answer

To simplify reality and focus on essential relationships between variables.

Question 20

Suppose a new government policy is evaluated using a randomized controlled trial (RCT). What is the main advantage of this approach?

Accepted Answer

It allows economists to establish causality by controlling for other variables.

Economic Theories, Data, and Graphs: Foundations for Microeconomics

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