Q: Which of the following is the correct formula for calculating an index number for a given year, using a base year value?

$$\text{Index Number} = \frac{\text{Value in Given Year}}{\text{Value in Base Year}} \times 100$$

Question 1

Which of the following statements is a normative statement?

Accepted Answer

The government should increase spending on healthcare to improve public well-being.

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 theories?

Accepted Answer

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

Question 4

Suppose a theory predicts that an increase in income leads to an increase in consumption. If data shows that as income rises, consumption also rises, what can we conclude?

Accepted Answer

There is a positive correlation, but not necessarily causation.

Question 5

Which of the following is the correct formula for calculating an index number for a given year, using a base year value?

Accepted Answer

$$	ext{Index Number} = \frac{	ext{Value in Given Year}}{	ext{Value in Base Year}} 	imes 100$$

Question 6

A time-series graph is most useful for showing:

Accepted Answer

How a single variable changes over time

Question 7

If a scatter diagram shows that as X increases, Y decreases, what type of relationship is this?

Accepted Answer

Negative relationship

Question 8

In the function $$C = 800 + 0.8W$$, where $$C is $$consumption and $$W is $$wage income, what does the coefficient 0.8 represent?

Accepted Answer

The marginal propensity to consume out of wage income

Question 9

A straight line on a graph has a slope of $$-0.5. If $$the variable on the vertical axis decreases by 500 units, how much does the variable on the horizontal axis increase?

Accepted Answer

$$1000$$

Question 10

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

Accepted Answer

There are too many uncontrolled variables in real-world markets.

Question 11

A function is said to be non-linear if:

Accepted Answer

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

Question 12

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

Accepted Answer

Average house prices in each Canadian province in 2024.

Question 13

If a function has a maximum at a certain point, what does this mean in economic terms?

Accepted Answer

The dependent variable is at its highest value at that point.

Question 14

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

Accepted Answer

Testing theories by confronting their predictions with empirical evidence.

Question 15

Suppose the Consumer Price Index (CPI) was 120 in 2020 and 150 in 2024. By what percentage did the average price level increase over this period?

Accepted Answer

$$25\%$$

Question 16

Which of the following is a common misconception about correlation and causation in economics?

Accepted Answer

Correlation always implies causation.

Question 17

A randomized controlled trial (RCT) in economics is most useful for:

Accepted Answer

Establishing a causal relationship between variables.

Question 18

If the function $$Y = f(X) is $$such that for every value of $$X$$ there is only one value of $$Y$$, then:

Accepted Answer

Y is a function of X.

Question 19

If a straight line has the equation $$Y = 5 - 2X$$, what is the slope of the line?

Accepted Answer

$$-2$$

Question 20

Which of the following best describes the marginal response in economic graphs?

Accepted Answer

The change in the dependent variable for a one-unit change in the independent variable.

Economic Theories, Data, and Graphs – Microeconomics Chapter 2 Study Notes

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