Q: Suppose the Consumer Price Index (CPI) in the base year is 100. If 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 an example of 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 to explain economic phenomena.

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 the theory to make it consistent with the facts or replace it with a superior theory.

Question 4

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

Accepted Answer

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

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 statements about causation and correlation is correct?

Accepted Answer

A finding that X and Y are correlated is not direct evidence of a causal relationship.

Question 7

Suppose the Consumer Price Index (CPI) in the base year is 100. If 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 8

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

Accepted Answer

The average house prices in each Canadian province in 2021.

Question 9

If the consumption function is given by $$C = 800 + 0.8W$$, where $$C is $$consumption and $$W is $$wage income, what is the marginal propensity to consume (MPC)?

Accepted Answer

$$0.8$$

Question 10

A straight line on a graph has a slope of $$-0.5. If $$the variable on the vertical axis decreases by $$1000$$ units as the variable on the horizontal axis increases by $$2000$$ units, which of the following correctly represents the calculation of the slope?

Accepted Answer

$$\frac{-1000}{2000} = -0.5$$

Question 11

Which of the following best describes a non-linear function in economics?

Accepted Answer

A function where the marginal response of Y to a change in X depends on the value of X.

Question 12

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

Accepted Answer

To compare the value of a variable relative to a base period, which is assigned the value 100.

Question 13

Which of the following is a key reason why economists have difficulty establishing causality in economic data?

Accepted Answer

Economic variables are usually influenced by many forces that vary simultaneously.

Question 14

A scatter diagram is most useful for:

Accepted Answer

Showing the relationship between two variables for multiple observations.

Question 15

Suppose a function has a minimum point. Which of the following statements is true at the minimum?

Accepted Answer

The slope of the function is zero.

Question 16

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

Accepted Answer

Theories are tested by confronting their predictions with evidence, and are amended or replaced if they conflict with facts.

Question 17

Which of the following is an example of a time-series data set?

Accepted Answer

The unemployment rate in Canada from 1978 to 2021.

Question 18

If a function is given by $$Y = 2X^2$ + 3X + 5$$, what is the slope of the function at $$X = 2$$?

Accepted Answer

$$11$$

Question 19

Which of the following statements about positive and normative economics is correct?

Accepted Answer

Positive statements can be tested by reference to facts, while normative statements depend on value judgments.

Question 20

A responsible economist, when giving policy advice, should:

Accepted Answer

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

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

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