Lesson1 - Analise Arrabito 061-18181 Econ 201, Principles...

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Analise Arrabito 061-18181 Econ 201, Principles of Economics 22.04.09 Lesson One Essay Questions: 1) Explain in detail the interrelationships between economic facts, theory, and policy. Critically evaluate this statement: "The trouble with economic theory is that it is not practical. It is detached from the real world." Answer: By using either the inductive or deductive methods, economists can develop theories based upon factually supported generalizations, not only about economic behavior, but also in order to formulate economic policies. The economic theory however is practical, because it allows policymakers to formulate economic policies that are relevant and can be translated into real world goal and problems that are factually based. 2) Identify each of the following as either a positive or a normative statement: A) The high temperature today was 89 degrees. Positive B) It was too hot today. Positive C) The general price level rose by 4.4 percent last year. Positive D) Inflation eroded living standards last year and should be reduced by government policies. Normative Answer: The first three are examples of positive statements because they are based on facts and avoid value judgments, they deal with what the economy is actually like. Whereas, the last example is normative because it involves value judgments about what the economy should be like. 3) Use the economic perspective to explain why someone who is normally a light eater at a standard restaurant may become somewhat of a glutton at a buffet-style restaurant which charges a single price for all you can eat. Answer:
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This note was uploaded on 06/23/2009 for the course ISI ECON 2 taught by Professor Steven during the Spring '09 term at Idaho.

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Lesson1 - Analise Arrabito 061-18181 Econ 201, Principles...

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