Critical thinking is one of the most important skills to learn in any course. One of several questions economists should ask themselves is how variables are defined. Which of the following is an example that illustrates the importance of questioning how economic variables are defined?

A New Jersey study shows that when the minimum wage increases, the unemployment rate decreases. The study concludes that an increase in the minimum wage benefits the overall economy.

The city of Washington D.C. raises the tax on gasoline because it needs to raise tax revenues and decrease its budget deficit. After the tax raise the city discovers that overall tax revenues have declined.

Data show that average wages in the economy have declined. The study concludes that the average person in the economy is worse off financially.

The production possibilities curve shifts out. This means that unemployment has decreased.