BA 372 Lesson 1 Assignment 6

BA 372 Lesson 1 Assignment 6 - 2 Why do economists...

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Ashley B. 258-10-0169 July 5, 2010-October 22, 2010 BA 372 Lesson#1, Assignment 6 1.Should an economic model describe reality exactly? Explain. No, an economic model should not describe reality exactly. There is no way that a model can be dead on. Economic models have two functions: first as a simplification of abstracted from observed data, and second as a means of selection of data based on a paradigm of econometric study. This complexity can be attributed to the diversity of many factors that determine economic activity. These factors include: individual and cooperative decision processes, resource limitations, environmental and geographical constraints, institutional and legal requirements and purely random fluctuations. Economists therefore must make a reasoned choice of which variables and which relationships between these variables are relevant and which ways of analyzing and presenting this information are useful.
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Unformatted text preview: 2. Why do economists sometimes offer conflicting advice to policymakers? Economists often give conflicting advice to policy makers for two basic reasons first, economists may disagree about the validity of alternative positive theories about how the world works. Secondly economists may have different values and therefore different normative views about what policy should try to accomplish. 3. Classify the following topics as relating to microeconomics or macroeconomics. A. a family’s decision about how much income to save ( microeconomics ) B. the effect of government regulations on auto emissions ( macroeconomics) C. the impact of higher national saving on economic growth ( macroeconomics) D. a firm’s decision about how many workers to hire ( microeconomics ) E. the relationship between the inflation rate and changes in the quantity of money ( macroeconomics )...
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