04 Jun Question EC 202- Macroeconomics SNHU 15EW3 Problem Set HWAssignment #1
Question
EC 202- Macroeconomics
SNHU 15EW3
Problem Set HWAssignment #1
Instructions: Please answer ALLof the Questions from 1 to12 Below. For questions requiring computations, please show your work completely to get full credit. You may work alone or in groups. If you work in groups, please state the name(s) of your classmate. You must submit your paper individually. No “group” paper accepted. You may send your completed answers electronically or bring them to class. This assignment is due at start of class on 1/22. Good Luck!
1Using this outline, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram, including the meaning of each flow, who constitutes which markets and how the inner loop is different from the outer loop (10 points)
2. How does the study of economics depend upon the phenomenon of scarcity? (1 point)
3. The prairie dog has always been considered a problem for American cattle ranchers. They dig holes that cattle and horses can step in and they eat grass necessary for cattle. Recently, ranchers have discovered that there is a demand for prairie dogs as pets. Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle.
Draw a production possibilities frontier showing a rancher’s production option between cattle production and prairie dog production showing increasing opportunity cost and on the same graph, show what would happen if the government grants new leases to ranchers, giving them 10,000 new acres of grassland each for grazing. (2 points)
4. With respect to how economists study the economy, which of the following statements is most accurate?
a. Economists study the past, but they do not try to predict the future.
b. Economists use “rules of thumb” to predict the future.
c. Economists devise theories, collect data, and analyze the data to test the theories.
d. Economists use controlled experiments in much the same way that biologists and physicists do.
5a. Economists face an obstacle that many other scientists do not face. What is that obstacle?
a. It is often difficult to formulate theories in economics.
b. It is often difficult and sometimes impossible to perform experiments in economics.
c. Economics cannot be addressed objectively; it must be addressed subjectively.
d. The scientific method cannot be applied to the study of economics.
5b. Economic models
a. are people who act out the behavior of firms and households so that economists can study this behavior.
b. are usually detailed replications of reality.
c. incorporate simplifying assumptions that often contradict reality, but also help
economists better understand reality.
d. are useful to researchers but not to teachers because economic models omit many details
of the real-world economy.
5c. The circular-flow diagram
a. is an economic model.
b. incorporates two types of decision makers: households and firms.
c. represents the flows of inputs, outputs, and dollars.
d. All of the above are correct.
5d. Two variables that have a negative correlation move in opposite directions. (True/False)
6. What factors can change the position of the demand curve? (2 pts)
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