What are the five steps by which economists arrive at a useful economic model?
What will be an ideal response?
1. Decide on the assumptions to use in developing the model.
2. Formulate a testable hypothesis.
3. Use economic data to test the hypothesis.
4. Revise the model if it fails to explain the economic data well.
5. Retain the revised model to help answer similar economic questions in the future.
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What determines how much market power a firm has?
What will be an ideal response?
When the economy suffers a temporary negative supply shock and the monetary policy makers try to stabilize economic activity in the short run, then
A) aggregate demand curve shifts rightward. B) output will be at its potential. C) inflation rate will be higher. D) all of the above. E) both A and B.
The idea of a "New Economy" driven by hi-tech equipment such as computers, cell phones, and the World Wide Web was rooted in part in the apparent simultaneous reversal of which of the following economic problems?
A) inflation B) slow growth in productivity C) the budget deficit D) All of the above
Increased production, but not increased inflation, will result in higher:
a. nominal GDP. b. real GDP. c. current dollar GDP. d. money GDP.