ECO 1104 Chapter Notes - Chapter 2: Income Tax, Longrun, John Maynard Keynes

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Lawrence Harris

Document Summary

The scientific method: observation, theory, and more observation. Development and testing of theories about how the world works. The use of theories and observations used in physics is also used for economics (isaac newton) Ex) an economist might notice prices rapidly rising and would want to find out why. If he finds a link in his data, he would be confident is his theory. Economists can"t do experiments because they can"t adjust a nation"s monetary policy to see what would happen, therefore, they must use whatever historical data that has been produced in the past. Ex) war in middle east interrupts flow of crude oil. Economic policymakers have difficulty on how to respond. Economic scientists get an opportunity to study the effects of a key natural resource on every nation"s economy. Assumptions can simplify the complex world and make it easier to understand. Ex) to study international trade, we can assume that the world only consists of two countries.