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

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1) Confronting predictions with evidence

2) Amend the theory if inconsistent with facts

9

## 2 things that can happen with theory

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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

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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

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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

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1) Positive slope

2) Negative slope

3) Zero slope

4) Infinite slope

26

## 4 types of non-linear relationships

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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