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Economic Theory

3. Which of the following statements are correct?
a) Economics is a natural science;
b) in large measure, economics is the study of how people make
choices;

c) if poverty was eliminated there would be no reason to study
economics;

d) Economics analysis can be used to explain how societies, but
not individuals, make decisions.

4. Microeconomics is best described as the study of:
a) the choices made by individual households, firms, and
governments;

b) inflation, unemployment, gross national product, and the
nations economy as a whole;
c) how markets interact in the aggregate economy;

d) marginal changes in the economy.

5. Macroeconomics is best described as the study of:
a) very large issues;
b) the choices made by individual households, firms, and
governments;

c) the nations economy as a whole;
d) the relationship between inflation and wage inequality.

6. Which of the following is a microeconomics question?
a) is it sensible for a government to subsidize tobacco production?
b) why do some countries grow faster than others?

c) should Congress and the president take action to reduce global
warming?
d) should the government attempt to influence the interest rate to

lower inflation?

Review Tasks

1. List three microeconomic decisions you have made today.

2. Look at a newspaper on the Internet. Find a news story about
macroeconomics. How do you know that it is about
macroeconomics?
3. Find a news story about microeconomics. How do you know that it

is about microeconomics?

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