Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
a. confused association and causation.
b. misunderstood the Ceteris paribus assumption.
c. used normative economics to answer a positive question.
d. built an untestable model.
Ans: a. confused association and causation.
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The candy store represented in the figure to the right is currently selling Qa units of candy at a price of Pa. Is this candy store maximizing its profit and if it is? not, what would you recommend to the? firm?
A) Yes, it is maximizing its profit by charging the highest price possible.
B) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. It should sell Qd units at a price of Pd.
C) No, it is not; it should lower its price to Pc and sell Qc units.
D) No, it is not; it should lower its price to Pb and sell Qb units.
With an upward sloping LM curve, a rising interest rate __________ money demand, so that a contractionary monetary policy is __________ than in the case of a vertical LM curve
A) raises; stronger B) raises; weaker C) lowers; stronger D) lowers; weaker
What does not cause a direct increase in consumption spending
What will be an ideal response?
Which of the following is an example of a normative statement?
A) A higher price for a good causes people to want to buy less of that good. B) A lower price for a good causes people to want to buy more of that good. C) To make the good available to more people, a lower price should be set. D) If you consume this good, you will be better off.