PRACTICE HOMEWORK - ECON 0110 PRACTICE HOMEWORK NUMBER 1...

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ECON 0110: PRACTICE HOMEWORK NUMBER 1 PROFESSOR KENKEL ANSWERS ARE PROVIDED AT THE END OF THE DOCUMENT Answer True = (a) or False = (b) 1. The three major goals of macroeconomic policy are low inflation, low unemployment and equal distribution of income. 2. The following is a positive economic statement. "We should have a balanced budget amendment." 3. A recession is defined as a period of two consecutive quarters of increases in inflation. 4. The four factors of production are land, labor, banks, and entrepreneurs. 5. The opportunity cost of an action is the highest valued foregone alternative. 6. A recession is defined as a period of two consecutive quarters of decreasing output. 7. The government's attempt to influence the economy by changing taxes and government spending is called welfare policy. 8. Macroeconomics differs from microeconomics in that macroeconomics studies the national economy while microeconomics analyzes the decisions of individual people and firms. 9. Positive economics provides a description of how the economy works. 10. Normative economics refers to statements concerning economic policies that the speaker thinks we should or ought to follow. 11. Excellent sources of data concerning the national economy are The Statistical Abstract of the United States, the Economic Report of the President and the Monthly Labor Review. 12. The term "ceteris paribus" means "it happened after this, therefore it happened because of this". 13. The "post hoc fallacy" refers to the mistake of assuming that, if event B occurred after event A, then A must have caused B. 14. The "fallacy of composition" refers to the mistake of assuming that what is true of a part is necessarily true for the whole. 15. Two variables are said to vary "directly" (or positively) if increases in one variable tend to be associated with increases in the other variable and decreases in one variable tend to be associated with decreases in the other variable. 16. Two variables are said vary "inversely" (or negatively) if increases in one variable tend to be associated with decreases in the other variable. 17. In economics, the term "physical capital" refers to goods that we have produced that are used to help produce other goods and services. Examples are factories, equipment, tractors and computers. 18. Positive economics attempts to understand behavior and the operation of economic systems without making judgements about whether the outcomes are good or bad. 19. Suppose a politician states that we should reduce inheritance taxes. This is a positive economic statement. 20. Normative economics involves judgements and prescriptions for courses of action. 21. The fallacy of composition is the erroneous belief that what is true for a part is necessarily true for the whole. 22. The phrase "ceteris paribus" means after this, therefore because of this.
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