p.2
Positive and Normative Statements
What are normative statements based on?
Value judgments and cannot be evaluated solely by facts.
p.3
Positive and Normative Statements
What should a responsible economist clarify in discussions?
Which part of the advice is normative and which part is positive.
p.2
Positive and Normative Statements
What characterizes positive statements?
They do not involve value judgments and are about matters of fact.
p.21
Functions and Their Graphs in Economics
What happens to the slope of a non-linear function as X changes?
The slope of the curve changes.
p.8
Statistical Analysis in Economics
What challenges do economists face when analyzing variables?
The variables are generally influenced by many forces that vary simultaneously.
p.22
Functions and Their Graphs in Economics
What is indicated by increasing marginal production costs?
As production increases, the cost of producing additional units rises.
p.24
Building and Testing Economic Theories
Why do economists develop theories or models?
To help them understand economic events in the real world.
p.24
Building and Testing Economic Theories
What is the relationship between theory and empirical testing in economics?
There is a continual interaction where theories are tested and refined based on empirical data.
p.4
Building and Testing Economic Theories
What do economists design methods for?
To analyze and evaluate government policies and examine global economic risks.
p.5
Building and Testing Economic Theories
What is a theory in economics?
An abstraction from reality.
p.5
Building and Testing Economic Theories
What are exogenous variables?
Independent variables that are outside the theory.
p.19
Graphing Economic Theories
What does it mean when two variables are positively related?
It means they move together in the same direction.
p.16
Cross-Sectional and Time-Series Data
What type of data is used in the Canadian unemployment rate graph?
Annual average of monthly, seasonally adjusted data.
p.8
Statistical Analysis in Economics
What is required to analyze complex economic data?
The use of appropriate—and complex—statistical techniques.
p.18
Functions and Their Graphs in Economics
What does the figure represent regarding income and consumption?
It shows the relationship between wage income and consumption levels.
p.23
Functions and Their Graphs in Economics
What does a function with a minimum represent?
The lowest point of output or cost in relation to input.
p.24
Graphing Economic Theories
What role do graphs play in economics?
Graphs help display data and illustrate economic theories.
p.17
Functions and Their Graphs in Economics
What does it mean when we say Y is a function of X?
It means that for every value of X, there is only one possible value of Y.
p.5
Building and Testing Economic Theories
What are endogenous variables?
Dependent variables that can be explained within a theory.
p.8
Statistical Analysis in Economics
What is the purpose of statistical analysis in economics?
To test a hypothesis such as 'if X occurs, then Y will also happen.'
p.22
Functions and Their Graphs in Economics
What does the figure illustrate regarding costs?
Increasing marginal cost.
p.11
Index Numbers and Consumer Price Index
What is an index number?
A measure of some variable, conventionally expressed relative to a base period assigned the value 100.
p.11
Index Numbers and Consumer Price Index
What is the most common index number?
The Consumer Price Index (CPI).
Can you give examples of single economic variables?
Unemployment, national income, or the average price of a house.
p.9
Correlation vs. Causation
What is usually required to establish causality?
Advanced statistical techniques.
p.20
Graphing Economic Theories
What does ΔP represent in the context of pollution reduction?
The change in pollution, which is -1000 in this case.
p.13
Index Numbers and Consumer Price Index
What does Figure 2-2 illustrate?
Index Values for Steel and Newsprint Output.
p.2
Positive and Normative Statements
What does a positive statement describe?
What actually is, was, or will be.
p.6
Building and Testing Economic Theories
How is a theory tested in economics?
By confronting its predictions with evidence.
p.14
Cross-Sectional and Time-Series Data
What are the two basic forms of economic data?
Cross-sectional data and time-series data.
p.14
Graphing Economic Theories
What is a scatter diagram?
A graph showing two variables, one measured on each axis.
p.9
Correlation vs. Causation
Is correlation evidence of causation?
No, correlation is not direct evidence of a causal relationship.
p.23
Functions and Their Graphs in Economics
What does a function with a maximum represent?
The highest point of output or profit in relation to input.
p.20
Graphing Economic Theories
What does ΔE represent in the context of pollution reduction?
The cost of reducing pollution, which is $2000.
p.17
Functions and Their Graphs in Economics
What happens to consumption when wage income (W) is zero?
Consumption is $800 a year.
p.3
Positive and Normative Statements
What is a common reason for disagreements among economists?
The positive/normative distinction.
p.4
Building and Testing Economic Theories
How do economists contribute to understanding economic growth?
By examining global economic risks.
p.5
Building and Testing Economic Theories
What role do assumptions play in a theory?
They provide the foundational basis for the predictions made by the theory.
p.16
Cross-Sectional and Time-Series Data
What does the time-series graph of the Canadian unemployment rate represent?
The unemployment rate from 1978 to 2021.
p.9
Correlation vs. Causation
What does positive correlation indicate?
That X and Y move together in the same direction.
p.14
Graphing Economic Theories
What does each point on a scatter diagram represent?
The values of the variables for a particular unit of observation.
p.24
Graphing Economic Theories
How do economists use graphs?
To illustrate their theories.
p.15
Graphing Economic Theories
What does Figure 2-3 represent?
A cross-sectional graph of average house prices for 10 Canadian provinces in 2021.
p.17
Functions and Their Graphs in Economics
What is the consumption function based on wage income in the example provided?
C = $800 + 0.8W, where C is consumption and W is wage income.
p.10
Controlled Experiments in Economics
What does the RCT approach help determine?
Underlying causality among economic variables.
p.5
Building and Testing Economic Theories
What are the components of a theory?
Variables, assumptions, and predictions.
p.6
Building and Testing Economic Theories
What happens if a theory conflicts with facts?
It will usually be amended or discarded for a superior theory.
p.8
Statistical Analysis in Economics
What type of experiments do economists rely on for statistical analysis?
Millions of 'uncontrolled' experiments occurring daily in the marketplace.
p.19
Graphing Economic Theories
What indicates that two variables are linearly related?
The graphs of these relationships are straight lines.
p.11
Index Numbers and Consumer Price Index
What does the Consumer Price Index (CPI) represent?
The average price paid by consumers for a typical 'basket' of goods and services.
p.24
Building and Testing Economic Theories
What is the process involved in testing economic theories?
A continual back-and-forth process between empirical testing of predictions and refining the theory.
p.23
Functions and Their Graphs in Economics
What is illustrated in Figure 2-10?
Profits as a function of output.
p.17
Functions and Their Graphs in Economics
How can a function be expressed?
In a verbal statement, numerical schedule (table), mathematical equation, or graph.
p.10
Controlled Experiments in Economics
What technique have some economists begun to adopt from the medical field?
Randomized controlled trials (RCT).
p.5
Building and Testing Economic Theories
What do predictions in a theory represent?
Expected outcomes based on the relationships between variables.
p.21
Functions and Their Graphs in Economics
What concept is illustrated by the figure mentioned in the text?
Diminishing marginal response.
p.9
Correlation vs. Causation
What does negative correlation indicate?
That X and Y move in opposite directions.
p.16
Cross-Sectional and Time-Series Data
What age group is included in the Canadian unemployment rate data?
Both sexes, 15 years and over.
p.11
Index Numbers and Consumer Price Index
How is the value of an index number calculated?
Absolute value in given period divided by absolute value in base period, multiplied by 100.
p.23
Functions and Their Graphs in Economics
What is illustrated in Figure 2-11?
Average fuel consumption as a function of speed.
p.20
Graphing Economic Theories
What does a slope of -0.5 indicate in the pollution reduction context?
For every 1 unit decrease in pollution, there is a $2000 cost increase.
p.10
Controlled Experiments in Economics
What do economists generally lack the ability to do?
Set up controlled experiments necessary to find cause.
Which organization provided the source for the data in Figure 2-3?
The Canadian Real Estate Association.
p.10
Controlled Experiments in Economics
What are economists primarily interested in?
Causal relationships in data.
