What is the rationale behind empiricism in economic analysis?
What will be an ideal response?
Empiricism refers to the use of data to test theoretical ideas or concepts. Empiricism is important as it enables economists to determine whether economic theories are consistent with actual human behavior. This enables economists to refute faulty theories or modify them such that they would better fit the real world. Empiricism also enables researchers to identify causal relationships between sets of variables.
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In a closed economy the marginal propensity to consume is 0.60 and the marginal propensity to invest is 0.10. What is the size of the multiplier?
A) 1.33 B) 2.33 C) 3.33 D) 0.70
Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, the equilibrium price
A) and output are too low to be optimal. B) and output are too high to be optimal. C) is too low to be optimal, and equilibrium quantity is too high. D) is too high to be optimal, and equilibrium quantity is too low. E) is optimal, but there is an excess supply.
Which of the following is true at the exchange equilibrium between two individuals?
A) Their marginal rates of substitution are equal. B) The slopes of the individuals' indifference curves are equal. C) Both individuals' marginal rates of substitution are equal to the ratio of the prices of the goods. D) A and B only E) A, B, and C are all true.
The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices 10% and found that the number of customers rose by almost 50%. This means: a. the demand curve for the premium movie channels shifted to the right. b. the supply curve for premium movie channels shifted to the left
c. the demand for premium movie channels is elastic in this price range. d. the demand for premium movie channels is inelastic in this price range.