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Chapter 2 Thinking Like an Economist




Question;51. In constructing models, economists;a.;leave;out equations, since equations and models tend to contradict one another.;b.;ignore;the long run, since models are useful only for short-run analysis.;c.;sometimes;make assumptions that are contrary to features of the real world.;d.;try to;include every feature of the economy.;52. Economic models;a.;are;people who act out the behavior of firms and households so that economists;can study this behavior.;b.;are;usually detailed replications of reality.;c.;incorporate;simplifying assumptions that often contradict reality, but also help;economists better understand reality.;d.;are;useful to researchers but not to teachers because economic models omit many;details of the real-world economy.;53. Which of the following statements is correct?;a.;Few;economic models incorporate assumptions.;b.;Different;economic models employ different sets of assumptions.;c.;Good;economic models attempt to mimic reality as closely as possible.;d.;Economic;models, to be accepted, must be tested by conducting experiments.;54. Which of these statements about economic models is correct?;a.;For;economists, economic models provide insights about the world.;b.;Economic;models are built with assumptions.;c.;Economic;models are often composed of equations and diagrams.;d.;All of;the above are correct.;55. The circular-flow diagram is an example of;a.;a;laboratory experiment.;b.;an;economic model.;c.;a;mathematical model.;d.;All of;the above are correct.;56. The circular-flow diagram is a;a.;visual;model of the economy.;b.;visual;model of the relationships among money, prices, and businesses.;c.;model;that shows the effects of government on the economy.;d.;mathematical;model of how the economy works.;57. A circular-flow diagram is a model that;a.;helps to;explain how participants in the economy interact with one another.;b.;helps to;explain how the economy is organized.;c.;incorporates;all aspects of the real economy.;d.;Both (a);and (b) are correct.;58. The circular-flow diagram;a.;is an;economic model.;b.;incorporates;two types of decision makers: households and firms.;c.;represents;the flows of inputs, outputs, and dollars.;d.;All of;the above are correct.;59. Which of the following statements about the circular-flow diagram;is correct?;a.;One must;imagine that the economy operates without money in order to make sense of the;diagram.;b.;The;diagram leaves out details that are not essential for understanding the;economic transactions that occur between households and firms.;c.;The;government cannot be excluded as a decision maker in a circular-flow diagram.;d.;All of;the above are correct.;60. In the simple circular-flow diagram, the participants in the;economy are;a.;firms;and government.;b.;households;and firms.;c.;households;and government.;d.;households;firms, and government.


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