CH 02: The Economists' Tool Kit Flashcards
After you have worked through this learning unit, you should be able to • explain how economists test hypotheses, develop economic theories, and use models in their analyses. • explain how the all-other-things unchanged (ceteris paribus) problem and the fallacy of false cause affect the testing of economic hypotheses and how economists try to overcome these problems. • distinguish between normative and positive statements. • distinguish between microeconomics and macroeconomics
What is the correct term for ‘all other things unchanged’?
Ceteris Paribus
What is the ‘Fallacy of False Cause’?
Reaching the incorrect conclusion that one event causes another because the two events tend to occur together is called the fallacy of false cause.
What is a Normative statement?
A normative statement is one that makes a value judgment. Such a judgment is the opinion of the speaker; no one can “prove” that the statement is or is not correct.
What is a Positive statement?
A statement of fact or a hypothesis is a positive statement.
What is the fundamental difference between Microeconomics and Macroeconomics?
Microeconomics is the branch of economics that focuses on the choices made by individual decisionmaking units in the economy—typically consumers and firms—and the impacts those choices have on individual markets. Macroeconomics is the branch of economics that focuses on the impact of choices on the total, or aggregate, level of economic activity.
