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Thinking Like an Economist 343
10.
Normative statements are not
a.
descriptive.
b.
prescriptive.
c.
claims about how the world should be.
d.
made by economists speaking as policy advisers.
11.
A statement describing how the world is
a.
is a normative statement.
b.
is a positive statement.
c.
would only be made by an economist speaking as a policy adviser.
d.
would only be made by an economist employed by the government.
12.
A statement describing how the world should be
a.
is a normative statement.
b.
is a positive statement.
c.
would only be made by an economist speaking as a scientist.
d.
would only be made by an economist employed by the government.
13.
One way to characterize the difference between positive statements and normative statements is
as follows:
a.
Positive statements tend to reflect optimism about the economy and its future, whereas
normative statements
tend to reflect pessimism about the economy and its future.
b.
Positive statements offer descriptions of the way things are, whereas normative statements offer
opinions on
how things ought to be.
c.
Positive statements involve advice on policy matters, whereas normative statements are
supported by
scientific theory and observation.
d.
Economists outside of government tend to make normative statements, whereas government-
employed
economists tend to make positive statements.
Thinking Like an Economist 345
14.
Economists view positive statements as
a.
affirmative, justifying existing economic policy.
b.
optimistic, putting the best possible interpretation on things.
c.
descriptive, making a claim about how the world is.
d.
prescriptive, making a claim about how the world ought to be.
15.
Economists view normative statements as
a.
prescriptive, making a claim about how the world ought to be.
b.
descriptive, making a claim about how the world is.
c.
statements about the normal condition of the world.
d.
pessimistic, putting the worst possible interpretation on things.
16.
Economists speaking like scientists make
a.
normative statements.
b.
prescriptive statements.
c.
claims about how the world is.
d.
claims about how the world should be.
17.
Economists speaking like policy advisers make
a.
positive statements.
b.
descriptive statements.
c.
claims about how the world is.
d.
claims about how the world should be.
18.
Economists speaking like scientists make
a.
positive statements.
b.
prescriptive statements.
c.
claims about how the world should be.
d.
More than one of the above is correct.
19.
Economists speaking like policy advisers make
a.
claims about how the world is.
b.
descriptive statements.
c.
normative statements.
d.
More than one of the above is correct.
20.
When economists make positive statements, they are
a.
speaking as scientists.
b.
speaking as policy advisers.
c.
making claims about how the world should be.
d.
revealing that they are very conservative in their views of how the world works.
21.
When economists make normative statements, they are
a.
speaking as scientists.
b.
speaking as policy advisers.
c.
making claims about how the world is.
d.
revealing that they are very liberal in their views of how the world works.
22.
When economists make
a.
positive statements, they are speaking not as policy advisers but as scientists.
b.
positive statements, they are speaking not as scientists but as forecasters.
c.
normative statements, they are speaking not as policy advisers but as scientists.
d.
normative statements, they are speaking not as policy advisers but as model-builders.
23.
When economists make
a.
positive statements, they are speaking not as scientists but as policy advisers.
b.
positive statements, they are speaking not as scientists but as forecasters.
c.
normative statements, they are speaking not as scientists but as policy advisers.
d.
normative statements, they are speaking not as policy advisers but as model-builders.
24.
You know an economist has crossed the line from policy adviser to scientist when he or she
a.
claims that the problem at hand is widely misunderstood by non-economists.
b.
makes positive statements.
c.
talks about values.
d.
makes a claim about how the world should be.
25.
You know an economist has crossed the line from scientist to policy adviser when he or she
a.
claims that the problem at hand is widely misunderstood by non-economists.
b.
talks about the evidence.
c.
makes normative statements.
d.
makes a claim about how the world is.
26.
A positive economic statement such as “Pollution taxes decrease the quantity of pollution
generated by firms”
a.
would likely be made by an economist acting as a policy advisor.
b.
would require values and data to be evaluated.
c.
would require data but not values to be evaluated.
d.
could not be evaluated by economists acting as scientists.
27.
A normative economic statement such as “The minimum wage should be abolished”
a.
would likely be made by an economist acting as a scientist.
b.
would require values and data to be evaluated.
c.
would require data but not values to be evaluated.
d.
could not be evaluated by economists acting as policy advisers.
28.
In principle, we can
a.
ignore positive statements when choosing among various public policy alternatives.
b.
ignore normative statements when choosing among various public policy alternatives.
c.
confirm or refute positive statements by examining evidence.
d.
confirm or refute normative statements by examining evidence.
29.
Which of the following is not correct?
a.
Evaluating statements about how the world should be involves values as well as facts.
b.
Positive statements can, in principle, be confirmed or refuted by examining evidence.
c.
Normative statements can be judged using data alone.
d.
Deciding what is good or bad policy is not just a matter of science.
30.
When an economist evaluates a positive statement, he or she is primarily
a.
examining evidence.
b.
acting as a scientist.
c.
concerned with verifying how the world is.
d.
All of the above are correct.
31.
Normative conclusions
a.
come from positive analysis alone.
b.
are based on ignorance of positive analysis.
c.
involve value judgments.
d.
reflect the economist’s role as scientist.
32.
Which of the following is an example of a positive, as opposed to normative, statement?
a.
Inflation is more harmful to the economy than unemployment is.
b.
If welfare payments increase, the world will be a better place.
c.
Prices rise when the government prints too much money.
d.
When public policies are evaluated, the benefits to the economy of improved equality should be
considered
more important than the costs of reduced efficiency.
33.
Which of the following is an example of a positive, as opposed to normative, statement?
a.
When the minimum wage is increased, unemployment is a predictable consequence.
b.
The income tax rate should be increased to offset the budget deficit.
c.
Increasing government spending is the best way to help the economy move out of a recession.
d.
More than one of the above are positive statements.
34.
Which of the following is a positive, as opposed to a normative, statement?
a.
The US Department of Justice should allow a merger between AT&T and T-Mobile because it
would have
little effect on consumers.
b.
Antitrust laws should be used to prevent further concentration in the wireless telephone service
market.
c.
The US Department of Justice sued AT&T to block its merger with T-Mobile.
d.
The wireless telephone service market is too highly concentrated.
35.
Which of the following statements is an example of a positive, as opposed to normative, statement?
a.
Americans deserve a cleaner environment.
b.
Reducing emissions reduces days missed from school due to asthma.
c.
All Americans are entitled to quality health care.
d.
Economic policies should focus on improving equality.
Thinking Like an Economist 355
36.
“Ensuring that Social Security is financially sound for future generations is an important use of
taxpayer dollars” is an example of a
a.
normative economic statement.
b.
positive economic statement.
c.
statement made by an economist working as a scientist.
d.
judgment based on evaluation of evidence, not values.
37.
“Prices rise when the quantity of money rises rapidly” is an example of a
a.
negative economic statement.
b.
positive economic statement.
c.
normative economic statement.
d.
statement that contradicts one of the basic principles of economics.
38.
Which of the following is not an example of a positive, as opposed to normative, statement?
a.
Higher gasoline prices will reduce gasoline consumption.
b.
Equality is more important than efficiency.
c.
Trade restrictions lower our standard of living.
d.
If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money.
39.
Which of the following is an example of a normative, as opposed to positive, statement?
a.
Universal health care would be good for U.S. citizens.
b.
An increase in the cigarette tax would cause a decrease in the number of smokers.
c.
A decrease in the minimum wage would decrease unemployment.
d.
A law requiring the federal government to balance its budget would increase economic growth.
40.
Which of the following is an example of a normative, as opposed to positive, statement?
a.
Gasoline prices ought to be lower than they are now.
b.
The federal government should raise taxes on wealthy people.
c.
The social security system is a good system and it deserves to be preserved as it is.
d.
All of the above are normative statements.
41.
Which of the following is an example of a normative, as opposed to positive, statement?
a.
If the price of a product decreases, people’s willingness to buy that product will increase.
b.
Reducing tax rates on the wealthy would benefit the nation.
c.
If the national saving rate were to increase, so would the rate of economic growth.
d.
The elimination of trade restrictions would increase an economy’s standard of living.
42.
Which of the following is an example of a normative, as opposed to positive, statement?
a.
Following the most recent recession, the economy is recovering at a slower than usual pace.
b.
To stimulate the economy during the most recent recession, the federal government increased
spending.
c.
In response to the most recent recession, the federal government extended the duration of
unemployment
benefits.
d.
The federal government’s responses to the most recent recession were insufficient.
43.
Which of the following is an example of a normative - as opposed to a positive - statement?
a.
The discount rate is the interest rate the Federal Reserve charges banks to borrow funds.
b.
The US income tax rate increases with the amount of income earned.
c.
The government should increase the tax on gasoline.
d.
The US unemployment rate increased to 10 percent in 2009.
44.
President Truman once said he wanted to find a one-armed economist because when he asked his
economists for
advice, they always answered, “On the one hand, ... On the other hand, ...”
Truman’s observation that economists’
advice is not always straightforward
a.
is rooted in the principle that people face tradeoffs.
b.
indicates that economists recognize that there are opportunity costs associated with policy
decisions.
c.
confirms that economists are not suited to be presidential advisers.
d.
More than one of the above is correct.
Thinking Like an Economist 359
45.
Which of the following is the best explanation for why President Harry Truman once said that he
wanted to find a
one-armed economist?
a.
President Truman received input from so many economists that he only wanted one view from
each.
b.
President Truman thought economists should analyze policies but not make or enforce them.
c.
Economists understand that most policy decisions involve trade-offs so they are likely to present
multiple
views of policies.
d.
A one-armed economist would conduct only positive analysis and no normative analysis.
46.
The Council of Economic Advisers
a.
was created in 1776 and consists of three members and a staff of several dozen economists.
b.
was created in 1776 and consists of thirty members and a staff of a dozen economists.
c.
was created in 1946 and consists of three members and a staff of several dozen economists.
d.
was created in 1946 and consists of thirty members and a staff of a dozen economists.
47.
The Council of Economic Advisers
a.
was created in 1946.
b.
advises the president of the United States on economic policy matters.
c.
writes the annual Economic Report of the President.
d.
All of the above are correct.
48.
Duties of the Council of Economic Advisers include
a.
advising the president and writing the annual Economic Report of the President.
b.
implementing the president’s tax policies.
c.
tracking the behavior of the nation’s money supply.
d.
All of the above are correct.
Thinking Like an Economist 361
49.
In addition to advising the president, one duty of the Council of Economic Advisers is to
a.
prepare the federal budget.
b.
write government regulations.
c.
advise Congress on economic matters.
d.
write the annual Economic Report of the President.
50.
The Economic Report of the President
a.
discusses recent developments in the economy and presents analysis of current policy issues.
b.
is written by the Council of Economic Advisers.
c.
is the responsibility of the economists at the Office of Management and Budget.
d.
Both a and b are correct.
51.
Economists at which of the following offices help formulate spending plans and regulatory policies?
a.
Office of Management and Budget
b.
Department of the Treasury
c.
Congressional Budget Office
d.
The Federal Reserve
52.
Economists at the Department of the Treasury
a.
design U.S. currency and coins.
b.
provide Congress with the annual budget.
c.
enforce the U.S. antitrust laws.
d.
provide advice on tax policy to the President.
