Carefully distinguish between an economic theory and economic model.
What will be an ideal response?
An economic theory is a deliberate simplification or abstraction of factual relationships that attempts to explain how those relationships work. It is an explanation of the mechanism behind observed phenomena. An economic model is a representation of a theory or a part of a theory used to gain insight into cause and effect. A theory can give rise to a large number of models. Thus, a theory is logically prior to a model and will ordinarily be more inclusive than a model.
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In Keynes's liquidity preference framework, if there is excess demand for money, there is
A) an excess demand for bonds. B) equilibrium in the bond market. C) an excess supply of bonds. D) too much money.
Refer to Scenario 10.2. What level of output maximizes total revenue?
A) 0 B) 90 C) 95 D) 100 E) none of the above
The host country's balance-of-payments problem tends to worsen when foreign firms:
a. invest solely in capital-intensive industries. b. repatriate their profits to the headquarters from the host country. c. acquire the foreign operations in order to diversify corporate investment holdings. d. refuse to share technological expertise with the host country. e. export all products to other countries.
In order to improve living standards for future generations, the economy must
a. sacrifice consumer goods today. b. reduce its investment goods. c. increase government spending. d. reduce growth in the population.