PE testbank chapter 2

Which is the best statement about the way economists study the economy?

• They study the past, but do not try to predict the future.

• They use a probabilistic approach based on correlations between economic events.

• They devise theories, collect data, then analyze the data to test the theories.

• They use controlled experiments much the same way a biologist or physicist does.

Terms used by an economist would include

• vector spaces and axioms.

• torts and venues.

• ego and cognitive dissonance.

• comparative advantage and elasticity.

By scientific method we mean

• the use of modern electronic testing equipment to understand the world.

• the dispassionate development and testing of theories about how the world works.

• the use of controlled experiments in understanding the way the world works.

• finding evidence to support preconceived theories about how the world works.

Who said, “The whole of science is nothing more than the refinement of everyday thinking.”?

• Isaac Newton

• Albert Einstein

• Sigmund Freud

• Benjamin Franklin

Albert Einstein once made the following observation about science:

• “The whole of science is nothing more than the refinement of everyday thinking.”

• “The whole of science is nothing more than an interesting intellectual exercise.”

• “In order to understand science, one must rely solely on abstraction.”

• “In order to understand science, one must transcend everyday thinking.”

Sir Isaac Newton’s development of the theory of gravity after observing an apple fall from a tree is an example of

• controlled experiments used to develop scientific theories.

• being in the right place at the right time.

• an idea whose time had come.

• the interplay between observation and theory in science.

A common thread between economics and other sciences such as physics is that

• experiments are most often conducted in a lab.

• real-world observations often lead to theories.

• a Ph.D. is required to truly understand any science.

• both deal primarily with abstract concepts.

The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in

• evaluating an economic experiment.

• devising an economic experiment.

• actually performing an experiment in an economic system.

• All of the above are correct.

Because it is difficult for economists to use experiments to generate data, they generally must

• do without data.

• use whatever data the world gives them.

• select a committee of economists to make up data for all economists to use.

• use hypothetical, computer-generated data.

When testing theories, economists

• must make do with whatever data the world gives them.

• can manipulate economic conditions easier than other scientific fields.

• can enlist the government’s help to manipulate economic conditions.

• can achieve statistically valid results with much smaller sample sizes.