Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 1, Problem 4QQ
To determine
Identify which option is correct for an economic model.
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Economic models must mirror reality or they are of no value.
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Econometric models have nothing to do with the reality." What say you?
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- Which statement is not true about the use of models in economics? 1. They are based on simplifying assumptions. 2. They are used to forecast economic variaables such as GDP growth. 3. They must closely mirror real life in order to be informative. 4. There are often multiple models that seek to explain the same economic phenomena. 5. They are usually represented graphicallyarrow_forwardEconomic models A are complicated because human behavior is complicated. B are simplifications of the phenomena they attempt to explain. C are exactly the same as the phenomena they describe. D require either algebra or graphs.arrow_forwardWhich of the following is not correct about most economic models? A) They are composed of equations and diagrams. B) They contribute very little to economist's understanding. C) They omit many features of the real world economy. D) In constructing models, economists make assumptions.arrow_forward
- Economic Models? a. are essential representations of the real world b. are used to explain how people think c. are never used for making economic projections or predictions d. are used to explain how people behavearrow_forwardMODIFIED TRUE or FALSE. Write “T” if the given statement is TRUE, correct and valid. Write “F”, if otherwise. If your answer is either “T” or “F” explain, why is it true or false. Cite a theory, use a formula or graph to support your answers. 1. Microeconomics is a branch of economics that deals with the decisions of individual households and firms. 2. Economic model is an abstract representation of the “unreal world” phenomena that one wishes to examine. 3. Economic model can be expressed to an equation holding other variables to be constant. 4. Independent variable or the explanatory variable (in an economic model) is the variable that provides the explanation for any change(s) in the response variable. 5. Points below the Production Possibility Frontier or PPF are the choices of the society that are infeasible due to its limited resources.arrow_forwardIdentify each statement as being associated with neoclassical economics or behavioral economics a. People are eager and accurate calculators. b. People are often selfless and generous. c. People have no trouble resisting temptation. d. People place insufficient weight on future events and outcomes. e. People treat others well only if doing so will get them something they want.arrow_forward
- Why do economists use models? to learn how the economy works to attract the attention of government officials to make economics accessible to the public to make sure that all of the details of the economy are included in their analysis Next Page Page 20 of 21arrow_forwardExplain the difference(s) between an economic and an econometric model.arrow_forwardThe illusion of pattern shapes our everyday lives. How does this illusion emerge (refer to law of small numbers & impossibility of causal explanations) and how does it affect decision-making?arrow_forward
- Economic behavior is more complex than assumed by conventional economic theory. Political economy explains the functioning of government. Behavioral economics ties psychology into human behavior. Economists assume that individuals make rational decisions. However real people are more complex. Based on what you have learned in your assigned reading, answer the following questions in your initial post: What are the human behaviors economists should observe when creating economic models? Example: people tend to find solutions that are good enough, but not the best solutions. In your responses, comment on at least two of your peers' posts and share example of how non-rational human behavior can change an economic outcome.arrow_forwardWhat is the best test of an economic theory? a. Whether it produces implications that are favored by the researcher. b. Its ability to predict real-world events, patterns, and changes. c. Its eloquence. d. The plausibility of its assumptions.arrow_forwardQ30 In order to test a theory, one must... a. Use assumptions that most closely reflect reality. b. Confront the predictions of the theory with evidence. c. Develop a better explanation than the one presented. d. Present a series of normative statements and positive statements. e. Develop normative statements from the law of large numbers.arrow_forward
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