“To be sure, any theoretical model must be abstracted ‘from the richness and complexity of behavior.’ However, abstraction becomes falsification when it so simplifies human behavior as to leave it unrecognizable and unexplained.” Explain
Please provide the best answer for the statement.
Critics of some economic theories make statements such as this. Their concern is that if economists simplify their theories too much, they may be testing hypotheses that will be unworkable in the real world, even if they cannot be rejected as false. For example, if one attempted to explain all human behavior as directed toward profit maximization, much of our emotional and irrational behavior would be unrecognizable and unexplained. However, attempts have been made to explain everything from love and marriage to child bearing as a result of conscious economic decision-making. If we exaggerate the impact of rational, economic thought, we are really falsifying reality. On the other hand, we should not neglect the impact of economic reasoning on human behavior.
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The largest component of GDP in the expenditure approach is
A) personal consumption expenditures. B) gross private domestic investment. C) government expenditure on goods and services. D) net exports.
The figure above represents the competitive market for slices of key lime pie. When the price is $3, the total consumer surplus equals
A) $120. B) $90. C) $60. D) $0. E) None of the above answers is correct.
An example of moral hazard is
a. A taxi driver paid per mile taking the shortest route b. a piece-rate garment worker shirking more than a per hour worker c. an hourly salesman working less hard than a commission salesman d. an author on contract going to as many book signings as one with a percentage royalty rate
If aggregate demand and aggregate supply both shift left, we can be sure that the price level is higher in the short run.
a. true b. false