ECON 208 Chapter 2 || QUESTIONS WITH SOLVED
SOLUTIONS!!
Disagreements over positive statements correct answers are best handled by an appeal to the
facts
A positive statement is one that states correct answers what is, was, or will be
Positive statements correct answers are falsifiable in principle by appeal to factual evidence
A normative statement correct answers is one that involves a value judgment
Suppose an economist tells you that the unemployment rate in Canada last year was 7.8%.
This is an example of a(n) ________ statement. correct answers positive
Suppose an economist tells you that, on average, people in Canada have too much personal
debt. This is an example of a(n) ________ statement. correct answers normative
A theory correct answers is designed to explain and predict what we observe
An assertion about the desirability of reducing unemployment by lowering payroll taxes is
most likely correct answers a normative statement
An economic theory requires, among other things, correct answers a set of definitions of the
variables to be considered
Suppose there is a theory that several things influence the price of fish in Halifax, one of
which is the weather during the fishing season. When examining the determinants of the price
of
fish, the weather is correct answers an exogenous variable, as it is determined outside the
theory
The statement that a country's rate of economic growth is influenced by its firms' investment
behaviour is an example of a(n) correct answers theory
The statement that a 2% increase in the money supply leads to a 2% increase in the price
level is an example of a(n) correct answers prediction
The statement that introducing a policy of legislated rent controls will lead to a housing
shortage is an example of a(n) correct answers prediction
The statement that a country's rate of GDP growth is influenced by individuals' saving
behaviour is an example of a(n) correct answers theory
Suppose an individual wheat farmer's income is influenced by the region's average daily
temperature. When examining the determinants of individual farmer income, the average
daily
temperature is a(n) ________ variable. correct answers exogenous
, When an economist assumes that the owners of firms are motivated only by the desire to
maximize profits, the economist most likely believes that correct answers it doesn't matter
whether or not the assumption is descriptively accurate; what matters is
whether a theory built on the assumption predicts well
An economic model that contains a highly realistic set of assumptions is correct answers not
likely to be useful because of its particularized nature and its complexity
Economists build models that abstract from the complexities of reality because correct
answers they believe they gain a greater understanding of reality
Suppose we have data for 1000 students for a period of one year. The data show that those
students who spend more hours studying have a higher grade point average (GPA). We can
say
that correct answers there is a positive correlation between hours of study time and GPA
Suppose economists at the World Bank discover a positive correlation between family
income and female education levels in developing countries. We can say that correct answers
the observed correlation is consistent with a theory that an increase in female education levels
causes an increase in family income.
Suppose economists at the Department of Finance in Ottawa employ an economic model that
predicts the effects of an increase in the GST. After implementation of the change,
researchers
find that the empirical data rejects the prediction. They are likely to correct answers modify
the theory in light of this newly acquired empirical knowledge
Suppose economists at the World Bank develop a theory with a prediction that increased
levels of foreign aid lead to increases in per capita GDP in the recipient developing countries.
They find empirical evidence that is consistent with this theory. The economists are able to
conclude that correct answers the evidence fails to reject the theory
When using statistics in economics, the possibility of error correct answers cannot be
eliminated
Suppose that a particular theory predicts that on sunny days consumption of ice cream will
rise and that on cloudy days consumption of ice cream will fall. If an economist tests this
theory
and finds that over a six-month period the theory predicts accurately, the economist would
likely
say correct answers the evidence fails to reject the theory
A hypothesis (or a prediction) is a statement about correct answers how two or more
variables are related to each other
A scientific prediction is correct answers a conditional statement of the following form: if A
occurs, then B will follow
The assumptions of a theory correct answers are indirectly refuted if and when the theory
itself is rejected by empirical observation
SOLUTIONS!!
Disagreements over positive statements correct answers are best handled by an appeal to the
facts
A positive statement is one that states correct answers what is, was, or will be
Positive statements correct answers are falsifiable in principle by appeal to factual evidence
A normative statement correct answers is one that involves a value judgment
Suppose an economist tells you that the unemployment rate in Canada last year was 7.8%.
This is an example of a(n) ________ statement. correct answers positive
Suppose an economist tells you that, on average, people in Canada have too much personal
debt. This is an example of a(n) ________ statement. correct answers normative
A theory correct answers is designed to explain and predict what we observe
An assertion about the desirability of reducing unemployment by lowering payroll taxes is
most likely correct answers a normative statement
An economic theory requires, among other things, correct answers a set of definitions of the
variables to be considered
Suppose there is a theory that several things influence the price of fish in Halifax, one of
which is the weather during the fishing season. When examining the determinants of the price
of
fish, the weather is correct answers an exogenous variable, as it is determined outside the
theory
The statement that a country's rate of economic growth is influenced by its firms' investment
behaviour is an example of a(n) correct answers theory
The statement that a 2% increase in the money supply leads to a 2% increase in the price
level is an example of a(n) correct answers prediction
The statement that introducing a policy of legislated rent controls will lead to a housing
shortage is an example of a(n) correct answers prediction
The statement that a country's rate of GDP growth is influenced by individuals' saving
behaviour is an example of a(n) correct answers theory
Suppose an individual wheat farmer's income is influenced by the region's average daily
temperature. When examining the determinants of individual farmer income, the average
daily
temperature is a(n) ________ variable. correct answers exogenous
, When an economist assumes that the owners of firms are motivated only by the desire to
maximize profits, the economist most likely believes that correct answers it doesn't matter
whether or not the assumption is descriptively accurate; what matters is
whether a theory built on the assumption predicts well
An economic model that contains a highly realistic set of assumptions is correct answers not
likely to be useful because of its particularized nature and its complexity
Economists build models that abstract from the complexities of reality because correct
answers they believe they gain a greater understanding of reality
Suppose we have data for 1000 students for a period of one year. The data show that those
students who spend more hours studying have a higher grade point average (GPA). We can
say
that correct answers there is a positive correlation between hours of study time and GPA
Suppose economists at the World Bank discover a positive correlation between family
income and female education levels in developing countries. We can say that correct answers
the observed correlation is consistent with a theory that an increase in female education levels
causes an increase in family income.
Suppose economists at the Department of Finance in Ottawa employ an economic model that
predicts the effects of an increase in the GST. After implementation of the change,
researchers
find that the empirical data rejects the prediction. They are likely to correct answers modify
the theory in light of this newly acquired empirical knowledge
Suppose economists at the World Bank develop a theory with a prediction that increased
levels of foreign aid lead to increases in per capita GDP in the recipient developing countries.
They find empirical evidence that is consistent with this theory. The economists are able to
conclude that correct answers the evidence fails to reject the theory
When using statistics in economics, the possibility of error correct answers cannot be
eliminated
Suppose that a particular theory predicts that on sunny days consumption of ice cream will
rise and that on cloudy days consumption of ice cream will fall. If an economist tests this
theory
and finds that over a six-month period the theory predicts accurately, the economist would
likely
say correct answers the evidence fails to reject the theory
A hypothesis (or a prediction) is a statement about correct answers how two or more
variables are related to each other
A scientific prediction is correct answers a conditional statement of the following form: if A
occurs, then B will follow
The assumptions of a theory correct answers are indirectly refuted if and when the theory
itself is rejected by empirical observation
