How Is an Economic Theory Tested

question 263

Multiple Choice

How is an economic theory tested?

• A) by assessing the realism of its assumptions
• B) by comparing and contrasting its simplicity with related theories
• C) by comparing its predictions with real-world observations
• D) by polling economists to see if there is consensus as to the validity of the hypothesis

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Definitions:

Gini Coefficient

A measure of inequality within a population, expressed as a number between 0 and 1, where 0 signifies perfect equality and 1 signifies maximum inequality.

Decades

Periods of ten years.

Income Inequality

The unequal distribution of earnings among individuals or households within a society or region.

Technological Change

The introduction of new methods of production or new products intended to increase the productivity of existing inputs or to raise marginal products.