Question 1

Which of the following statements is a normative statement?

Accepted Answer

Canada should increase its minimum wage to reduce poverty.

Question 2

Suppose an economist claims, 'If the government increases taxes, consumer spending will decrease.' What type of statement is this?

Accepted Answer

A positive statement, because it predicts a factual outcome.

Question 3

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

Accepted Answer

A variable whose value is determined outside the theory.

Question 4

A theory predicts that $Y = f(X)$, where $Y$ is consumption and $X$ is income. If income increases by $1000$ and the marginal propensity to consume is $0.8$, by how much does consumption increase?

Accepted Answer

$800$

Question 5

The Consumer Price Index (CPI) is an example of:

Accepted Answer

An index number

Question 6

How is an index number for a given year calculated?

Accepted Answer

By dividing the value in the given year by the value in the base year and multiplying by 100.

Question 7

If the index number for steel output in 2024 is $122.5$ (base year 2014), what does this indicate?

Accepted Answer

Steel output in 2024 was $122.5\%$ of the output in 2014.

Question 8

Which of the following is a key difference between correlation and causation in economic analysis?

Accepted Answer

Causation means one variable directly affects another, while correlation means variables move together but not necessarily due to a direct relationship.

Question 9

A scatter diagram is used to:

Accepted Answer

Show the relationship between two variables, with each point representing a unit of observation.

Question 10

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

Accepted Answer

Average house prices in 10 Canadian provinces in 2024.

Question 11

Suppose the function for consumption is $C = 800 + 0.8W$. What is the slope of the line representing this function?

Accepted Answer

$0.8$

Question 12

In the context of economic graphs, what does it mean if two variables are positively related?

Accepted Answer

The variables move together in the same direction.

Question 13

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

Accepted Answer

As the horizontal variable increases, the vertical variable decreases by $0.5$ units.

Question 14

Which statistical technique has recently been adopted by economists to help determine causality among economic variables?

Accepted Answer

Randomized controlled trials (RCT)

Question 15

A time-series graph is best used to:

Accepted Answer

Show how a variable changes over time.

Question 16

Which of the following is NOT a way to express a function in economics?

Accepted Answer

In a randomized controlled trial

Question 17

If a graph of annual production costs versus output is curved upward, what does this indicate about marginal costs?

Accepted Answer

Marginal costs are increasing.

Question 18

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

Accepted Answer

Testing predictions of theories against evidence and refining them as needed.

Question 19

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

Accepted Answer

There is a point where increasing the independent variable further will decrease the dependent variable.

Question 20

Which of the following is a plausible reason why economists often cannot conduct controlled experiments?

Accepted Answer

There are too many uncontrolled factors influencing the marketplace.

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

Study Guide - Practice Questions

Study Guide - Flashcards