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Scientific Method
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The name for the ongoing process that economists and other scientists use to (1) develop models of the world and (2) evaluate those models by testing them with data. (21)
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Model
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A simplified description of reality. Sometimes economists will refer to a model as a theory. These terms are usually used interchangeably. (21)
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Empirical Evidence
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Consists of facts that are obtained through observation and measurement. Also called data. (22)
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Hypotheses
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Predictions (typically generated by a model) that can be tested with data. (23)
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Mean
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The sum of all the different values divided by the number of values. (25)
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Median
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Value calculated by ordering the numbers from least to greatest and then finding the value half-way through the list. (25)
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Causation
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When one thing directly affects another. (ex.) Turning on the stove causes the water in the kettle to boil (26)
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Variable
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A changing factor or characteristic.
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Correlation
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Two variables tend to change at the same time. (27)
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Positive Correlation
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When two variables tend to move in the same direction. (ex.) marriage rates and income (27)
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Negative correlation
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Implies that two variables tend to move in opposite directions. (ex.) education level and employment (27)
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Zero Correlation
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When variables have movements that are not related. (28)
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Omitted Variable
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Something that has been left out of a study that, if included, would explain why two variables that are in the study are correlated. (ex.) ice cream, drowning actually caused by summer (28)
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Reverse Causality
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When researchers confuse the direction of cause and effect. (ex.) Wealthy people are healthier bc they can afford healthcare -OR- bc healthy people can work more so they can get more money (28)
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Experiment
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A controlled method of investigating casual relationships among variables. (29)
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Randomization
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The assignment of subjects by chance, rather than by choice, to a treatment group or a control group. (29)
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Natural Experiment
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An empirical study in which some process--out of the control of the experimenter--has assigned subjects to control and treatment groups in a random way or nearly random way. (ex.) researcher studying why some cities were bombed in the Vietnam war (30)
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Time series graph
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Displays data at different points in time. (37)