Which of the following steps does an economist take when studying an economy?

create theories based on observations

test theories by collecting data and doing controlled experiments

modify theories based on evidence

specify the assumptions on which the theory is based

All of the above

None of the above

The adage, "there is no such thing as a free lunch" is used to illustrate the principle that

money is all that is important

people face tradeoffs

livelihood must be earned

All of the above

None of the above The circular flow diagram is an example of

a laboratory experiment

an economic model

a mathematical model

All of the above Which two groups are included in the simple circular flow diagram?

government and households

firms and households

firms and government

markets and government

One way to differentiate between positive and normative statements is

government economists make positive statements and industry economists make normative statements

positive statements are optimistic and normative statements are pessimistic

positive statements describe the world as it is, whereas normative statements offer opinions on how the world should be

positive statements are futuristic and normative statements are based in the present