Tools of economic analysis Key terms

Question 1

A model or theory…

Answer 1

makes assumptions from which it deduces how people will behave. It is a deliberate simplification of reality.

Question 2

A behavioural law is a …

Answer 2

sensible theoretical relationship not rejected by evidence over a long period.

Question 3

A time series is …

Answer 3

a sequence of measurements of the same variable at different points in time.

Question 4

Cross-section data …

Answer 4

record at a point in time the way an economic variable differs across different individuals or groups of individuals.

Question 5

An index number …

Answer 5

expresses data relative to a given base value.

Question 6

Nominal values..

Answer 6

are measured in the prices ruling at the time of measurement.

Question 7

Real values..

Answer 7

adjust nominal values for changes in the price level.

Question 8

The purchasing power of money…

Answer 8

is an index of the quantity of goods that can be bought for £1.

Question 9

The percentage change..

Answer 9

is the absolute change divided by the original number, then multiplied by 100.

Question 10

The growth rate is..

Answer 10

the percentage change per period (usually a year).

Question 11

A scatter diagram..

Answer 11

plots pairs of values simultaneously observed for two different variables.

Question 12

Econometrics..

Answer 12

uses mathematical statistics to measure relationships in economic data.

Question 13

Other things equal ..

Answer 13

is a device for looking at the relation between two variables, but remembering other variables also matter.