19 Jan 2012
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The whole of science is nothing more than a refinement of everyday thinking . The scientific method: observation, theory, and more observation y an economist might develop a theory about inflation. The theory might assert that high inflation arises when the government prints too much money. To test this theory, the economist could collect and analyze data on prices and money from different countries. If growth in the quantity of money were not at all related to the rate at which prices are rising, the economist would start to doubt the validity of his theory of inflation. By assuming two countries and two goods, we can focus our thinking. These inputs are called factors of production. y households own the factors of production and consume all the goods and services that the firms produce y households and firms interact in two types of markets.