Economic methodology: Practice Questions

• a.That the economic model being used is based on normative rather than positive statements.
• b.That the time period under consideration is long enough for all factors of production to be varied.
• c.That an economy is operating at its maximum possible output on its production possibility curve.
• d.That all other influencing variables are held constant when examining the relationship between two specific variables.

• a.To prove that normative statements are superior to positive statements.
• b.To ensure that all economic forecasts account for long-run structural changes.
• c.To eliminate the need for mathematical equations in economic theory.
• d.To isolate the relationship between two specific variables by holding all other factors constant.

• a.

  The use of the ceteris paribus assumption to isolate the effect of a single variable within a social science context.

• b.

  The use of an empirical law that guarantees identical results in every similar economic environment.

• c.

  The application of a normative statement to establish a scientific fact about production costs.

• d.

  A very long run analysis where all factors of production, including technology and social institutions, are variable.

• a.The unemployment rate in the country has risen by \(2\%\) this year.
• b.The government should increase the minimum wage to reduce poverty.
• c.Lowering interest rates usually leads to an increase in investment.
• d.An increase in indirect tax leads to a shift in the supply curve.

• a.It ensures that the model's conclusions are normative rather than positive.
• b.It allows economists to isolate the relationship between two specific variables by holding others constant.
• c.It provides a mathematical proof that human behaviour is always rational.
• d.It guarantees that the economic model will perfectly reflect real-world outcomes.

Write your answer out first, then check it against the worked solution.

Write your answer out first, then check it against the worked solution.

Write your answer out first, then check it against the worked solution.