chapter 2: true of false Flashcards Preview

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Flashcards in chapter 2: true of false Deck (15):
1

Economic models must mirror reality, or they are of no value

FALSE, ECONOMIC MODELS ARE SIMPLIFICATIONS OF REALITY

2

assumptions make the world easier to understand because they simplify reality and focus our attention

T

3

the payment from firms to households for the use of the factors of production are wages, interest, and profits

F; THE PAYMENTS ARE WAGES, RENT AND PROFIT

4

the factors of production that households sell to firms are labour, land and capital

T

5

if an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

T

6

If an economy is operating on its PPF, it must produce less of one good if it produces more of another

T

7

points outside the PPF are attainable but inefficient

F; POINTS OUTSIDE THE PPF CANNOT YET BE ATTAINED

8

if an economy were experiencing substantial unemployment, the economy is producing inside the PPF

T

9

The PPF is bowed outward because the tradeoffs between the production of any two goods are constant

F; IT IS BOWED OUTWARD BECASEU THE TRADEOFFS ARE NOT CONSTANT BUT ARE INCREASING

10

an advance in production technology would cause the production possibilities curve to shift outward

T

11

Macroeconomics is concerned with the study of how households and firms make decisions and how they interact in specific markets

F; MACROECONOMICS IS THE STUDY OF ECONOMY-WIDE PHENOMENA

12

the statement, An increase in inflation tends to cause unemployment to fall in the short run is normative

F; THIS STATEMENT IS POSITIVE

13

when economists make positive statements, they are more likely to be acting as scientists

T

14

Microeconomics and Macroeconomics both use the same set of economic models

F; EACH FILED HAS ITS OWN SET OF MODELS

15

Most economists agree that agricultural subsidies should be enhanced

F; MOST ECONMISTS AGREE THA TAGRICULTURAL SUBSIDIES SHOULD BE ELIMINATED