Economic Methodology
62 questions· page 1 of 7
To increase production, a firm in industry X needs to install capital equipment, while a firm in industry Y needs to research and introduce a new technology.
What time periods are illustrated by these cases?
Options
| industry X | industry Y | |
|---|---|---|
| A | short run | long run |
| B | long run | long run |
| C | long run | very long run |
| D | very long run | very long run |
The price of a good rises by 5% and the quantity of it demanded rises by 3%. At the same time, the incomes of consumers of the good rise by 4%.
The law of demand appears not to be working in this case.
What is the most likely explanation?
Options
A Other things did not remain equal.
B The demand for the good was price inelastic.
C The real price of the good fell.
D The time period was the very short run.
Which statement about a free vaccination programme is normative?
Options
A It will help raise life expectancy.
B It is likely to improve the welfare of society.
C It will result in lower spending on other medical services.
D Tax revenues generated through improved economic activity will exceed the spending on vaccination.
What is the best definition of a positive economic statement?
Options
A A statement that is based on fact and can be tested.
B A statement that attempts to influence economic decisions.
C A statement that is subjective and cannot be confirmed.
D An encouraging economic update in the opinion of the central bank.
What is a common criticism of economics?
Options
A It fails to establish theories of economic behaviour.
B It is unable to construct models of how an economy might work.
C It lacks the ability to use and apply mathematics.
D It is very difficult to undertake laboratory experiments in economics.
What is an example of a normative statement?
Options
A Indirect taxes are cheap to collect.
B Indirect taxes are taxes on income.
C Indirect taxes are unfair.
D Indirect taxes increase inequality.
What is an example of a normative statement?
Options
A Government expenditure is an injection into the circular flow of income.
B Government expenditure in India in 2022 was 29% of gross domestic product.
C The best policy measure to reduce inflation is a reduction in government expenditure.
D The United States of America is the country with the highest military expenditure.
The following appeared in a newspaper article.
‘The economies of the poorest nations have large international debts; the richest nations should cancel the debts of these nations and reduce poverty.’
What is the nature of each statement?
Options
| poorest nations have large international debts | richest nations should cancel these debts to reduce poverty | |
|---|---|---|
| A | normative | normative |
| B | normative | positive |
| C | positive | positive |
| D | positive | normative |
Which statement about factors of production is correct?
Options
A In the short run all factors are fixed; in the long run all factors are varied.
B In the short run at least one factor is fixed; in the long run all factors can be varied.
C In the short run at least one factor is varied; in the long run all factors are fixed.
D In the short run at least one factor is varied; in the long run at least one factor is fixed.
Which statement is a normative statement?
Options
A Aggregate demand will increase following a decrease in interest rates.
B A rise in unemployment will decrease inflationary pressures.
C The incentive to work will rise if benefit payments are reduced.
D Unsustainable economic growth is more harmful to the economy than hyperinflation.