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

A theory in economics is best described as:

Accepted Answer

An abstraction from reality that uses variables, assumptions, and predictions.

Question 3

Suppose a theory predicts that if the price of gasoline increases, the quantity demanded will decrease. If real-world data shows that both price and quantity demanded increased, what should economists do according to the scientific approach?

Accepted Answer

Amend or discard the theory to make it consistent with the evidence.

Question 4

Which of the following best describes an exogenous variable in an economic theory?

Accepted Answer

A variable that is determined outside the theory and taken as given.

Question 5

A positive correlation between two variables means:

Accepted Answer

Both variables move together in the same direction.

Question 6

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 7

A scatter diagram is most useful for:

Accepted Answer

Showing the relationship between two variables for multiple observations.

Question 8

If the slope of a straight line is $$-0.5$$, what does this indicate about the relationship between the two variables?

Accepted Answer

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

Question 9

Which of the following best illustrates the difference between cross-sectional and time-series data?

Accepted Answer

Cross-sectional data compares different groups at one point in time; time-series data shows changes in one variable over time.

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 $$1000$$, by how much does consumption increase?

Accepted Answer

$$0.8 	imes 1000 = 800$$

Question 11

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

Accepted Answer

Correlation does not necessarily imply causation.

Question 12

Why do economists often use randomized controlled trials (RCTs) in recent years?

Accepted Answer

To determine underlying causal relationships among economic variables.

Question 13

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

Accepted Answer

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

Question 14

A function with a minimum point is best described as:

Accepted Answer

A function where the dependent variable reaches its lowest value at a certain point.

Question 15

Which of the following is an example of a positive statement?

Accepted Answer

The inflation rate was 3% last year.

Question 16

Suppose a line on a graph has a slope of $$2. If $$the independent variable increases by $$3$$ units, by how much does the dependent variable change?

Accepted Answer

$$6$$ units

Question 17

Which of the following best describes the process of building and testing economic theories?

Accepted Answer

Theories are tested against evidence and refined or replaced if inconsistent with facts.

Question 18

If the Consumer Price Index (CPI) in the base year is $$100$$ and the absolute value of the basket in the current year is $$1250$$ while it was $$1000 in $$the base year, what is the CPI in the current year?

Accepted Answer

$$125$$

Question 19

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

Accepted Answer

Hospitals as medical doctors

Question 20

A responsible economist, when giving policy advice, should:

Accepted Answer

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

Economic Theories, Data, and Graphs: Foundations for Microeconomics

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