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Chapter 2 Thinking Like an Economist

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Question;37. Which of the following is not an example of a positive, as;opposed to normative, statement?;a.;Higher;gasoline prices will reduce gasoline consumption.;b.;Equality;is more important than efficiency.;c.;Trade;restrictions lower our standard of living.;d.;If a;nation wants to avoid inflation, it will restrict the growth rate of the;quantity of money.;38. Which of the following is an example of a normative, as opposed to;positive, statement?;a.;Universal;health care would be good for U.S. citizens.;b.;An;increase in the cigarette tax would cause a decrease in the number of;smokers.;c.;A;decrease in the minimum wage would decrease unemployment.;d.;A law;requiring the federal government to balance its budget would increase economic;growth.;39. Which of the following is an example of a normative, as opposed to;positive, statement?;a.;Gasoline;prices ought to be lower than they are now.;b.;The;federal government should raise taxes on wealthy people.;c.;The;social security system is a good system and it deserves to be preserved as it;is.;d.;All of;the above are normative statements.;40. Which of the following is an example of a normative, as opposed to;positive, statement?;a.;If the;price of a product decreases, people?s willingness to buy that product will;increase.;b.;Reducing;tax rates on the wealthy would benefit the nation.;c.;If the;national saving rate were to increase, so would the rate of economic growth.;d.;The;elimination of trade restrictions would increase an economy?s standard of;living.;41. Which of the following is an example of a normative, as opposed to;positive, statement?;a.;The;price of gasoline came down sharply during the second half of 2006.;b.;If the;government were to set a maximum legal price on gasoline, then there would be;a shortage of gasoline.;c.;Income;taxes should be reduced.;d.;The;federal government obtains much of its revenue from income taxes.;42. Which of the following is an example of a normative - as opposed to;a positive - statement?;a.;The;discount rate is the interest rate the Federal Reserve charges banks to;borrow funds.;b.;The US;income tax rate increases with the amount of income earned.;c.;The;government should increase the tax on gasoline.;d.;The US;unemployment rate increased to 10 percent in 2009.;43. President Truman once said the wanted to find a one-armed economist;because when he asked his economists for advice, they always answered, ?On the;one hand,... On the other hand,...?;Truman?s observation that economists? advice is not always;straightforward;a.;is;rooted in the principle that people face tradeoffs.;b.;indicates;that economists recognize that there are opportunity costs associated with;policy decisions.;c.;confirms;that economists are not suited to be presidential advisers.;d.;More;than one of the above is correct.;44. The Council of Economic Advisers;a.;was;created in 1776 and consists of three members and a staff of several dozen;economists.;b.;was;created in 1776 and consists of thirty members and a staff of a dozen;economists.;c.;was;created in 1946 and consists of three members and a staff of several dozen;economists.;d.;was;created in 1946 and consists of thirty members and a staff of a dozen;economists.;45. The Council of Economic Advisers;a.;was;created in 1946.;b.;advises;the president of the United States on economic policy matters.;c.;writes;the annual Economic Report of the President.;d.;All of;the above are correct.;46. Duties of the Council of Economic Advisers include;a.;advising;the president and writing the annual Economic Report of the President.;b.;implementing;the president?s tax policies.;c.;tracking;the behavior of the nation?s money supply.;d.;All of;the above are correct.

 

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