The wealth effect of a change in the price level refers to the fact that wealthier individuals tend to spend more on foreign goods.
a. True
b. False
Indicate whether the statement is true or false
Question 2Which of the following contains only normative statements?
a. The birth rate is reduced as economies urbanize, but that also leads to a decreased average age of developing countries' populations.
b. An increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.
c. A decrease in the price of butter will increase the amount of butter purchased, but that would be bad because it would increase Americans' cholesterol levels.
d. None of the above contain only normative statements.
Question 3If nominal GDP in 2011 is greater than nominal GDP in 2010, the economy's real output of goods and services must have risen.
a. True
b. False
Indicate whether the statement is true or false
Question 4When the foreign price level falls, domestic goods become more expensive relative to foreign goods, causing domestic net exports and aggregate demand to fall.
a. True
b. False
Indicate whether the statement is true or false
Question 5Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire. This quotation:
a. contains positive statements only.
b. contains normative statements only.
c. contains both normative and positive statements.
d. contains neither normative nor positive statements.
Question 6The formula for calculating real GDP = (price index/nominal GDP) 100.
a. True
b. False
Indicate whether the statement is true or false
Question 7The fact that the aggregate demand curve slopes downward means that aggregate expenditures increase when the price level decreases.
a. True
b. False
Indicate whether the statement is true or false
Question 8Which of the following is a positive statement?
a. Increased money supply growth will lead to a higher rate of inflation.
b. There are more millionaires in Uganda than in the United States.
c. People watch more TV during finals week than during the rest of the term.
d. All of the above are positive statements.
Question 9A price index creates a measure of how many dollars it would take to maintain a constant purchasing power over time.
a. True
b. False
Indicate whether the statement is true or false
Question 10If people expect the economy to do well in the future, they will increase their consumption today at every price level.
a. True
b. False
Indicate whether the statement is true or false
Question 11Which of the following is false?
a. A positive statement must be testable but need not be true.
b. A hypothesis is a normative statement.
c. Normative analysis involves subjective, non-testable statements.
d. The majority of disagreements in economics stem from normative issues.
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