What does it mean to say that economists use the scientific method? How do economists distinguish between models that work and those that don't?
What will be an ideal response?
The scientific method is the name for the ongoing process that economists and other scientists use to develop models of the world, test those models with data and evaluate how well they predict or describe behavior. While this process may not reveal the ‘true' model of the world, it does help in identifying models that are useful in understanding the world.
In order to decide whether models make accurate predictions or not, economists test them against real-world data. Data are facts, measurements, or statistics that describe the world. This process of testing models against data is called empiricism.
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If the supply of a factor is perfectly inelastic, then
A) no more than the existing quantity can be supplied. B) the supply curve is horizontal. C) sellers will provide whatever quantity is demanded at the going price. D) a fall in price results in no quantity being supplied.
When a tax is imposed on a good for which both demand and supply are very elastic, a. sellers effectively pay the majority of the tax
b. buyers effectively pay the majority of the tax. c. the tax burden is equally divided between buyers and sellers. d. None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.
People anticipate inflation will be 3 percent during the next several years. If this is true, when the real interest rate is 4 percent, the money interest rate will be
a. 1 percent. b. 3 percent. c. 4 percent. d. 7 percent.
One important similarity among the European economies is
a. the very minor role played by the state in almost all cases. b. the unimportance of safety nets to provide income and employment security. c. the almost total absence of subsidization by the state. d. their common constitutional history e. the high share of transfers for the welfare state.