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Thinking Like an Economist 363
53. The president of the United States receives tax policy advice from economists in the
a. Federal Reserve.
b. Department of Justice.
c. Department of the Treasury.
d. Congressional Budget Office.
54. The design of tax policy is one of the responsibilities of economists who work at the
a. Council of Economic Advisers.
b. Federal Reserve.
c. Department of the Treasury.
d. Congressional Budget Office.
364 Thinking Like an Economist
55. A duty of economists at the Department of Labor is to
a. analyze data on workers.
b. schedule federal holidays.
c. enforce the nation's antitrust laws.
d. All of the above are correct.
56. Analysis of data on workers and those looking for work is conducted by economists at the
a. Office of Management and Budget.
b. Department of Labor.
c. Congressional Budget Office.
d. Department of the Treasury.
Thinking Like an Economist 365
57. Economists at the Department of Justice
a. track the behavior of the nation’s money supply.
b. advise Congress on economic matters.
c. help enforce the nation’s antitrust laws.
d. prepare the federal budget.
58. The nation's antitrust laws are enforced by economists at the Department of
a. Labor.
b. Health and Human Services.
c. Justice.
d. Treasury.
366 Thinking Like an Economist
59. Some, but not all, government economists are employed within the administrative branch of
government. Which of the following government agencies employs economists outside of the
administrative branch?
a. the Department of Labor
b. the Department of the Treasury
c. the Congressional Budget Office
d. the Council of Economic Advisers
60. Economists who are primarily responsible for advising Congress on economic matters work in
which agency?
a. the Federal Reserve
b. the Congressional Budget Office
c. the Department of the Treasury
d. the Department of Commerce
Thinking Like an Economist 367
61. Congress relies on economists at the Congressional Budget Office to
a. enforce the nation's antitrust laws.
b. set the nation’s monetary policy.
c. provide evidence that incumbent members of Congress are performing well in their jobs.
d. provide independent evaluations of policy proposals.
62. The President receives economic policy advice from economists at each of the following except
a. the Council of Economic Advisors.
b. the Department of the Treasury.
c. the Congressional Budget office.
d. the Department of Labor.
368 Thinking Like an Economist
63. The Federal Reserve
a. designs tax policy.
b. enforces the nation's antitrust laws.
c. sets the nation's monetary policy.
d. analyzes data on workers.
64. Economists hold many positions advising the president and Congress including
a. being a member of the Council of Economic Advisers.
b. helping to enforce antitrust laws at the Department of Justice.
c. conducting research at the Congressional Budget Office.
d. All of these are possible positions that economists hold.
Thinking Like an Economist 369
65. John Maynard Keynes believed the ideas of economists to be
a. generally incorrect.
b. powerful.
c. academic and without practical application.
d. rantings of madmen.
66. One difference between a hypothetical benevolent king implementing the best policy and the
president implementing the best policy in the real world is the president has to be concerned about
a. any misunderstandings in communicating the policy to the public.
b. whether the policy will affect his standing among different groups in the electorate.
c. what amendments will be suggested by members of Congress.
d. All of the above are correct.
370 Thinking Like an Economist
67. Policymaking in a representative democracy
a. is straightforward and does not involve any disagreement.
b. benefits from the input of economists, even if their advice is not always followed.
c. is conducted without the input of economists.
d. is always based exclusively on the results of economic analysis.
68. Suppose an economist advises a city’s mayor to begin charging drivers a fee to drive on a busy
highway during congested times. The mayor does not implement the policy because it would not be
popular with voters. Which of the following statements best describes the scenario?
a. This is a common occurrence. The policymaker knows the best policy but chooses not to institute
it for other reasons.
b. This is a common occurrence. The policymaker usually disregards an economist’s advice
because they do not believe it is the most efficient policy.
c. This is an unlikely occurrence. Most of the time, policymakers follow the advice of economists
and institute the most efficient policies.
d. This would never happen. Policymakers always follow the advice of economists.
Thinking Like an Economist 371
Multiple Choice – Section 03: Why Economists Disagree
1. “If all economists were laid end to end, they would not reach a conclusion.” Who made this
whimsical observation?
a. Harry Truman
b. George Bernard Shaw
c. John Maynard Keynes
d. Ronald Reagan
2. President Ronald Reagan once joked that a Trivial Pursuit game designed for economists would
a. have no questions but hundreds of answers.
b. have 100 questions and 3,000 answers.
c. have 1,000 questions but no answers.
d. never produce a winner.
372 Thinking Like an Economist
3. Economists sometimes give conflicting advice because
a. graduate students in economics are encouraged to argue with each other.
b. economists have different values and scientific judgment.
c. economists acting as scientists do not like to agree with economists acting as policy advisers.
d. economics is more of a belief system than a science.
4. The two basic reasons why economists often appear to give conflicting advice to policymakers are
differences in
a. opinions and education.
b. opinions and values.
c. scientific judgments and education.
d. scientific judgments and values.
Thinking Like an Economist 373
5. Sometimes economists disagree because their scientific judgments differ. Which of the following
instances best reflects this source of disagreement?
a. One economist believes everyone should pay the same percentage of their income in taxes;
another economist believes that wealthier citizens should pay a higher percentage of their income
in taxes.
b. One economist believes that manufacturing firms should face greater regulation to preserve the
environment; another economist believes the government should not intervene in free markets.
c. One economist believes that equality should be valued over efficiency in policy decisions; another
economist believes that efficiency should be valued over equality in policy decisions.
d. One economist believes the government should tax a household’s income; another economist
believes the government should tax a household’s consumption.
6. Differences in scientific judgement between economists are similar to all of the following except
a. astronomers debating whether the sun or earth was at the center of the solar system.
b. meteorologists debating the existence of global warming.
c. two politicians arguing about the fairness of the tax code.
d. explorers debating whether or not the earth was flat before the time of Christopher Columbus.
374 Thinking Like an Economist
7. Sometimes economists disagree because their values differ. Which of the following instances best
reflects this source of disagreement?
a. One economist believes the North American Free Trade Agreement (NAFTA) has led to a loss
of American jobs; another economist disputes this claim.
b. One economist believes that when income taxes are cut, people will increase their spending;
another economist believes that when income taxes are cut, people will increase their saving.
c. One economist advises against increases in sales taxes because she thinks such increases are
unfair to low- income people; another economist disputes the idea that increases in sales taxes
are unfair to low-income people.
d. One economist believes that, prior to the Civil War, slavery contributed to economic growth in the
South; another economist believes that slavery held back the South's economic growth.
8. Joe and Fred are economists. Joe thinks that the wealthiest 10% of the US population should be
taxed a rate higher than the rest of society because they can better afford it. Fred thinks that
everyone should be taxed at the same rate because that is the fairest scenario and the wealthy
should not be penalized for their success. In this example, Joe and Fred
a. disagree about the validity of a positive theory.
b. have different normative views about tax policy.
c. must both be incorrect because tax policy is never that simple.
d. None of the above is correct.
Thinking Like an Economist 375
9. Which of the following is one of the basic reasons why economists often appear to give conflicting
advice to policymakers?
a. similar opinions about the validity of economic theories
b. significant differences in education
c. differences in personal values
d. a reliance on normative statement for research theories
10. Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would
result in higher household saving because income that is saved would not be taxed. Avik does not
think that household saving would respond much to a change in the tax laws. In this example, Yi
and Avik
a. hold different normative views about the tax system.
b. disagree about the validity of a positive theory.
c. have a fundamental misunderstanding of the tax system.
d. More than one of the above is correct.
376 Thinking Like an Economist
11. Which of the following statements is correct about the extent of disagreement among economists?
a. There is a great deal of agreement among economists on virtually every economic issue.
b. There is a great deal of agreement among economists on many important economic issues.
c. All disagreements among economists are attributable to differences in their values.
d. All disagreements among economists are attributable to the fact that different economists have
different degrees of faith in the validity of alternative economic theories.
12. A survey which sought the opinion of professional economists on fourteen propositions about
economic policy found that
a. the respondents were almost equally divided on the propositions.
b. the respondents favored the propositions by a slight margin.
c. the respondents disagreed with the propositions by a slight margin.
d. there was overwhelming endorsement of the propositions among the respondents.
Thinking Like an Economist 377
13. A survey of professional economists revealed that more than three-fourths of them agreed with a
number of statements, including which of the following?
a. Tariffs and import quotas usually reduce general economic welfare.
b. A large federal budget deficit has an adverse effect on the economy.
c. Minimum wage increases unemployment among young and unskilled workers.
d. All of the above are correct.
14. A survey of professional economists revealed that more than three-fourths of them agreed with
fourteen economic propositions. Which of the following is not one of those propositions?
a. The United States should not restrict employers from outsourcing work to foreign countries.
b. The United States should withdraw from the North American Free Trade Agreement (NAFTA).
c. The United States should eliminate agricultural subsidies.
d. Local and state governments should eliminate subsidies to professional sports franchises.
378 Thinking Like an Economist
15. A survey of professional economists revealed that more than three-fourths of them agreed with
fourteen economic propositions. Which of the following is not one of those propositions?
a. A ceiling on rents reduces the quantity and quality of housing available.
b. Fiscal policy has a significant stimulative impact on a less than fully employed economy.
c. The gap between Social Security funds and expenditures will become unsustainably large within
the next fifty years if current policies remain unchanged.
d. The United States should implement universal health care for its citizens.
16. Almost all economists agree that rent control
a. has no effect on the rental income of landlords.
b. allows the market for housing to work more efficiently.
c. adversely affects the availability and quality of housing.
d. is a very inexpensive way to help the most needy members of society.
Thinking Like an Economist 379
17. Policies such as rent control and trade barriers persist in spite of the fact that economists are
virtually united in their opposition to such policies, probably because
a. economists have not yet convinced the general public that the policies are undesirable.
b. economists engage in positive analysis, not normative analysis.
c. economists have values that are different from the values of most non-economists.
d. economists’ theories are not easily confirmed or refuted in laboratory analysis.
18. Policies such as rent control and trade barriers persist
a. because economists are about evenly divided as to the merits of those policies.
b. because almost all economists agree that those policies have no discernible economic effects.
c. because almost all economists agree that those policies are desirable.
d. despite the fact that almost all economists agree that those policies are undesirable.
19. Almost all economists agree that tariffs and import quotas
a. reduces general economic welfare.
b. increases general economic welfare.
c. have no effect on general economic welfare.
d. stimulate a less than fully employed economy.
380 Thinking Like an Economist
20. Almost all economists agree that local and state governments should
a. eliminate subsidies to professional sports franchises.
b. increase subsidies to professional sports franchises.
c. copy economic policy from Washington, D.C.
d. prevent companies from outsourcing work.
Multiple Choice – Section 04: Let’s Get Going
1. John Maynard Keynes referred to economics as an easy subject,
a. at which very few excel.
b. but not as easy as philosophy or the pure sciences.
c. which very few can enjoy.
d. which deals primarily with common sense.
Thinking Like an Economist 381
2. How did the influential economist John Maynard Keynes explain his remark that though economics
is an easy subject compared with the higher branches of philosophy or pure science, it is a subject
at which few excel?
a. Most people who study economics are not very bright.
b. Good economists must possess a rare combination of gifts.
c. Economics is quite boring; hence, people tend to lose interest in it before mastering it.
d. Good thinkers become frustrated with economics because it does not make use of the scientific
method.
3. According to economist John Maynard Keynes, a great economist must also be a(n)
a. mathematician.
b. historian.
c. philosopher.
d. All of the above are correct.
382 Thinking Like an Economist
4. John Maynard Keynes described economics as an easy subject at which very few excel. Which of
the following is not one of the reasons Keynes gave for why so few people excel at the study of
economics?
a. An economist must also be a mathematician, historian, statesman, and philosopher in some
degree.
b. An economist must understand symbols and speak in words.
c. An economist must be purposeful and disinterested in a simultaneous mood.
d. An economist must understand environmental science, regulation, and political science.
Multiple Choice – Section 05: APPENDIX: Graphing: A Brief Review
1. Which of the following is not correct?
a. When developing economic theories, graphs offer a way to visually express ideas that might be
less clear if described with equations or words.
b. Graphs are one way of expressing the relationships among variables.
c. When studying the relationship between two economic variables, graphs allow economists to draw
indisputable conclusions about causes and effects.
d. When analyzing economic data, graphs provide a powerful way of finding and interpreting
patterns.
