Flashcards in Chapter 2 - Economic theories, data and graphs Deck (29)
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1
Normative statement def
depends on value judgment, opinion. can't be supported by facts
2
Positive statements def
Statements about what is, was or will be. Not biased by value judgments
3
Why economists disagree in public discussions
Poor communication or failure to acknowledge their ignorance.
4
Biggest source of public disagreement upon economists and what they should do
Positive/normative distinction. Should make difference between normative advice and positive facts
5
3 things theory consists of
1) Set of definitions about variables (endogenous and exogenous)
2) Set of assumptions (motives, causation, etc.)
3) Set of predictions (or hypotheses)
6
Endogenous variable def
Variable we want to study/explain/understand
7
Exogenous variable def
Other variables that influence the endogenous variable
8
Testing theories 2 things
1) Confronting predictions with evidence
2) Amend the theory if inconsistent with facts
9
2 things that can happen with theory
1) Rejected by data -> put into question
2) Confirmed by data (no matter how unlikely theory is, confirming data will be found)
10
Positive correlation meaning
X and Y move together
11
Negative correlation meaning
X and Y move in opposite directions
12
Correlation vs causality
Correlation -> association
Causality -> X causes Y
13
Reverse causality
X and Y related in a way that is opposite to what we expected
14
Branch of science used in economy
statistics
15
How data can be displayed (2)
Tables or graphs
16
What do we use if we are interested in relative movements of variables
index numbers
17
index number def
Compares changes in some variable relative to some base period
18
index formula
Value of index in given period = absolute value in given period/absolute value in base period x 100
19
Two forms in which economic variables come and def
Cross-sectional data (picture in time)
Time-series data (evolution in time)
20
Scatter diagram def
Points -> shows relationship between 2 variables
21
Scatter diagram interpretations (4) and what they mean
1) Strong correlation : strong relationship
2) Weak correlation : look for alternative factors with stronger relationships
3) No correlation : look for alternative relationship
4) J-shaped association : complex relationship
22
Functional relations 4 ways to express them
1) Verbal statement
2) Mathematical equation
3) Table (numerical schedule)
4) Graph
23
what do we say about variables when graph of relationship between 2 variables is a straight line
linearly related
24
what do we say about variables when graph of relationship between 2 variables is NOT a straight line
non-linearly related
25
4 types of linear relationships
1) Positive slope
2) Negative slope
3) Zero slope
4) Infinite slope
26
4 types of non-linear relationships
1) Positive slope
2) Negative slope
3) Positive then negative
4) Negative then positive
27
Linear or non-linear relationships : which is more common
non-linear
28
How to use the slope
Look for absolute value
29
