An economist at the University of Alaska at Anchorage has been asked to explain why the price of ...

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to assemble a scholarly answer, the professor should take which steps?
 a. Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts.
  b. Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations.
  c. Ask people in Alaska why they are not purchasing oil.
 d. None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Question 2

Pessimistic consumer expectations and decreased government spending are both associated with:
 a. a downward movement along the aggregate demand curve.
  b. an upward movement along the aggregate demand curve.
  c. a leftward shift of the aggregate demand curve.
  d. a rightward shift of the aggregate demand curve.
  e. a steeper slope of the aggregate demand curve.

Question 3

Economists need to develop abstractions in order to:
 a. avoid analyzing real-world economic interactions, which are too complicated to understand.
  b. distinguish normative economic behavior from positive economic behavior.
 c. avoid committing the fallacy of composition.
 d. understand and explain economic behavior.

Question 4

An increase in aggregate demand due to higher foreign income will cause:
 a. domestic equilibrium GDP to increase.
  b. domestic equilibrium GDP to decrease.
  c. domestic prices to fall.
  d. foreign prices to fall.
  e. foreign equilibrium GDP to fall.

Question 5

The best test of an economic theory is:
 a. the rigor of its mathematical formulation.
  b. its ability to explain and predict.
 c. the accuracy of its assumptions.
 d. the level of real-world detail it captures.

Question 6

Which of the following would result in a decrease in aggregate demand?
 a. A higher domestic price level
  b. Higher raw materials prices
  c. Higher rates of tax
  d. Technological advances
  e. Expansionary government policy

Question 7

An economic theory is tested by:
 a. assessing the realism of its assumptions.
 b. polling economists to see if there is consensus as to the validity of the hypothesis.
  c. comparing and contrasting its simplicity with related theories.
 d. comparing its predictions with real-world data.

Question 8

Which of the following illustrates an optimistic expectation of the people about the economy?
 a. A movement to the right along the aggregate demand curve
  b. A rightward shift of the aggregate demand curve
  c. A leftward shift of the aggregate demand curve
  d. A movement to the left along the aggregate demand curve
  e. A flatter slope of the aggregate demand curve

Question 9

Economists use theories to:
 a. abstract from the complexities of the world.
  b. understand economic behavior.
 c. explain and help predict human behavior.
  d. do all of the above.

Question 10

Which of the following accounts for a movement along a given AD curve?
 a. The substitution effect
  b. The tax rate effect
  c. The real-balance effect
  d. The foreign aid effect
  e. The government spending effect

Question 11

Which of the following is correct?
 a. Theory and hypothesis are interchangeable terms meaning the same thing.
  b. A hypothesis may result from a tested and confirmed theory.
 c. A theory may result from a tested and confirmed hypothesis.
 d. A hypothesis is a theory whose formulation relies on mathematics.

Question 12

Which of the following is most likely to lead to an inward shift of the aggregate demand curve?
 a. A decrease in the prices of raw materials
  b. A decline in foreign price levels
  c. A decline in the domestic price level
  d. An optimistic expectation about the economy's performance in the near future
  e. A decrease in foreign income

Question 13

Which of the following statements is most accurate?
 a. If something is rare it is also has to be scarce.
 b. Scarcity can and will be eliminated in the short run.
  c. Scarcity can and will be eliminated in the long run.
  d. Scarcity cannot be eliminated in any time frame.