question
1) The Economist as Scientist
The Scientific Method: Observation, Theory, and More Observation
The Scientific Method: Observation, Theory, and More Observation
answer
economists are not allowed to MANIPULATE a nation's policies to generate useful data so they have to make do with PAST ECONOMY
question
1) The Economist as Scientist
The Scientific Method
The Scientific Method
answer
1. OBSERVATION - COLLECTING DATA
2. ANALYZING = SEEKING CORRELATIONS
3. THEORIZING
4. REFINEMENT OF THEORIES AFTER MORE OBSERVATION
2. ANALYZING = SEEKING CORRELATIONS
3. THEORIZING
4. REFINEMENT OF THEORIES AFTER MORE OBSERVATION
question
1) The Economist as Scientist
The Scientific Method
The Scientific Method
answer
economics follows the SCIENTIFIC METHOD and DEVELOPS AND TESTS THEORIES
question
1) The Economist as Scientist
The Role of Assumptions
The Role of Assumptions
answer
assumptions can simplify the complex world TO IMPROVE OUR UNDERSTANDING; economists use different assumptions when studying short-run and long-run effects of a change in the quantity of money
question
1) The Economist as Scientist
Economic Models
Economic Models
answer
economic models omit many details to allow us to see what is truly important; are built with assumptions; SIMPLIFY REALITY to improve our understanding of it
question
1) The Economist as Scientist
Our First Model: The Circular Flow Diagram
Our First Model: The Circular Flow Diagram
answer
a visual model of the economy that shows how dollars flow through markets among households and firms
question
1) The Economist as Scientist
Our First Model: The Circular Flow Diagram
2 types of decision makers
Our First Model: The Circular Flow Diagram
2 types of decision makers
answer
firms and households
question
1) The Economist as Scientist
Our First Model: The Circular Flow Diagram
FIRMS
Our First Model: The Circular Flow Diagram
FIRMS
answer
produce goods and services using inputs (labor land, and capital)
question
1) The Economist as Scientist
Our First Model: The Circular Flow Diagram
HOUSEHOLDS
Our First Model: The Circular Flow Diagram
HOUSEHOLDS
answer
own the factors of production and consume all the goods and services that the firms produce
question
1) The Economist as Scientist
Our First Model: The Circular Flow Diagram
2 types of markets
Our First Model: The Circular Flow Diagram
2 types of markets
answer
markets for goods and services
-households = buyers
-firms = sellers
markets for the factors of production
-households = sellers
-firms = buyers
-households = buyers
-firms = sellers
markets for the factors of production
-households = sellers
-firms = buyers
question
1) The Economist as Scientist
Our First Model: The Circular Flow Diagram
Inner and Outer Loops
Our First Model: The Circular Flow Diagram
Inner and Outer Loops
answer
Inner - flows of inputs and outputs
Outer - flow of dollars
Outer - flow of dollars
question
1) The Economist as Scientist
Our Second Model: The Production Possibilities Frontier
Our Second Model: The Production Possibilities Frontier
answer
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
question
1) The Economist as Scientist
Microeconomics and Macroeconomics
Microeconomics and Macroeconomics
answer
P1-7 = microeconomics - the study of how HOUSEHOLDS AND FIRMS make decisions and how they interact in markets
P 8-10 = macroeconomics - the study of ECONOMY-WIDE PHENOMENA, including inflation, unemployment, and economic growth
P 8-10 = macroeconomics - the study of ECONOMY-WIDE PHENOMENA, including inflation, unemployment, and economic growth
question
2) The Economist as a Policy Adviser
Positive versus Normative Analysis
Positive versus Normative Analysis
answer
POSITIVE statements - claims that attempt to describe the world as it is (scientist) DESCRIPTIIVE, CAN BE VERIFIED OR REFUTED
NORMATIVE statements - claims that attempt to PRESCRIBE how the world SHOULD BE (policy adviser), solved with FACTS and VALUE JUDGEMENT
NORMATIVE statements - claims that attempt to PRESCRIBE how the world SHOULD BE (policy adviser), solved with FACTS and VALUE JUDGEMENT
question
2) The Economist as a Policy Adviser
Economists in Washington
Economists in Washington
answer
an economist who says that all policy decisions are easy or clear-cut is an economist not to be trusted
question
2) The Economist as a Policy Adviser
Why Economists' Advice Is Not Always Followed
Why Economists' Advice Is Not Always Followed
answer
their advice is only one ingredient of a complex recipe
question
3) Why Economists Disagree
Differences in SCIENTIFIC JUDGEMENT
Differences in SCIENTIFIC JUDGEMENT
answer
they have different hunches about the validity of ALTERNATIVE THEORIES or about the size of IMPORTANT PARAMETERS that measure how economic variables are related
question
3) Why Economists Disagree
Differences in VALUES
Differences in VALUES
answer
ETHICAL STANDARD, RELIGION, or POLITICAL PHILOSPOHY
question
3) Why Economists Disagree
Perception versus Reality
Perception versus Reality
answer
more economists agree than people think
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