Econ 1014 Exam 1 Study Guide

Econ 1014 Exam 1 Study Guide - Unit 1 Section 1 Economic...

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Unit 1 Section 1: Economic Models 1. All good economic models should: a. Model the economy as accurately as possible b. Make realistic assumptions c. Illustrate the economy using graphs and equations d. Simplify reality so that economists can get a clearer picture of the portion of the economy they are studying e. All of the above 2. For a model to be useful to an economist, it must: a. Be easy to use b. Be able to make good predictions about the economy c. Be able to be illustrated with an equation and a graph d. Be based on assumptions that are always realistic e. All of the above 3. A good economic model must: 4. Which is the best statement about the way 5. Economists employ the Scientific Method in their study of the economy. This means: a. Economists observe the world around them to try to figure out the “rules” for how the economy works. They formulate theories, which are statements of these rules. Then they gather data to test their theories. b. Economists devise controlled experiments to determine the rules for how people make decisions. c. Economists collect data and devise models based on this data. Then they develop theories to explain the results of the models. d. Economists devise models to explain how the economy works. They then predict the outcome of these models and finally they collect data to se if it matches their predictions. Based on these predictions and outcomes, they devise the theories to explain the economy. e. Economists formulate simplified theories about how the world works by employing unrealistic simplifying assumptions. Unit 1 Section 2: Why Economists Disagree Positive vs. Normative Statements 1. Students who attend class and study receive higher grades on the exams a. This is a positive statement. It makes a statement about the way the world is, rather than a value judgment about the way the world should be. It is a statement that could at least theoretically be tested and proven true or false by observing a group of students that regularly attends class and studies and comparing their exam scores to a second group of students that does not regularly attend class and study. 2. Students should attend class and study
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a. This is a normative statement. This is a value judgment. It is saying what students “should” do, in the opinion of the person making the statement. There is no way to test whether students “should” do something.
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