Q: Suppose the Consumer Price Index (CPI) in the base year is 100, and the absolute value of the CPI in the current year is 125. What is the index value for the current year?

$$\frac{125}{100} \times 100 = 125$$

Question 1

Which of the following is a normative statement?

Accepted Answer

Canada should increase its minimum wage to reduce poverty.

Question 2

What is the main difference between endogenous and exogenous variables in economic theories?

Accepted Answer

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

Question 3

An economist claims, 'If the government increases spending, GDP will rise.' This statement is:

Accepted Answer

Positive, because it describes a factual relationship.

Question 4

Suppose the Consumer Price Index (CPI) in the base year is 100, and the absolute value of the CPI in the current year is 125. What is the index value for the current year?

Accepted Answer

$$\frac{125}{100} 	imes 100 = 125$$

Question 5

Which of the following best describes a positive correlation between two economic variables?

Accepted Answer

Both variables move together in the same direction.

Question 6

Why do economists often use scatter diagrams in their analysis?

Accepted Answer

To show the relationship between two variables for multiple observations.

Question 7

A straight line on a graph representing the relationship between two variables has a slope of $$-0.5. $$What does this indicate?

Accepted Answer

The variables are negatively related; as one increases, the other decreases.

Question 8

Which of the following is NOT a typical place where economists work?

Accepted Answer

Elementary schools

Question 9

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

Accepted Answer

The slope changes as the independent variable changes.

Question 10

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

Accepted Answer

Correlation means two variables move together, but does not prove one causes the other.

Question 11

An economist uses a randomized controlled trial (RCT) to study the effect of a job training program on employment rates. What is the main advantage of this approach?

Accepted Answer

It allows for the establishment of a causal relationship.

Question 12

Given the consumption function $$C = 800 + 0.8W$$, where $$C is $$consumption and $$W is $$wage income, what is the marginal propensity to consume?

Accepted Answer

$$0.8$$

Question 13

Which type of economic data is best represented by a graph showing average house prices across Canadian provinces in a single year?

Accepted Answer

Cross-sectional data

Question 14

If the slope of a line representing the relationship between pollution reduction and cost is $$0.5$$, what does this mean?

Accepted Answer

For every unit increase in pollution reduction, cost increases by $$0.5$$ units.

Question 15

Which of the following is an example of a function with a minimum?

Accepted Answer

Average cost as a function of output, where costs decrease and then increase as output rises.

Question 16

Why is the scientific approach central to the study of economics?

Accepted Answer

It allows economists to test theories against evidence and refine them.

Question 17

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

Accepted Answer

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

Question 18

Which statement best describes the process of theory refinement in economics?

Accepted Answer

Theories are continually tested and refined based on empirical evidence.

Question 19

A time-series graph is most useful for showing:

Accepted Answer

How a single variable changes over time.

Question 20

Which of the following is a responsible practice for economists when giving public advice?

Accepted Answer

Clearly stating which parts of their advice are normative and which are positive.

Economic Theories, Data, and Graphs: Foundations for Microeconomics

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