Chapter 1.4

Question 1

The two ways of thinking in the economics world

Answer 1

Positive and normative economics

Question 2

Logic

Answer 2

A method of reasoning, which involves making a series of statements each of which is true if the preceding statements are true

Question 3

Hypothesis

Answer 3

An educated guess, usually indicating a cause-and-effect relationship about an event

Question 4

Empirical evidence

Answer 4

Real-world information, observations and data acquired through senses and experiences

Question 5

Theory

Answer 5

A general explanation of a set of interrelated events, usually based on several hypotheses that have been test successfully

Question 6

Refutation

Answer 6

To contradict, disprove, or show that a hypothesis or theory is wrong

Question 7

Positive economics

Answer 7

The study of economics based on the scientific method, used to arrive at knowledge about the economic world. Includes descriptions, models, hypotheses, theories and laws

Question 8

Normative economics

Answer 8

Forms the basis of judgements about what economic goals and policies ought to be. It is based on value judgments, because it identifies important economic problems that should be addressed and prescribes what should be done to solve them