EC120 Chapter Notes - Chapter 2: Department Of Finance Canada, Political Philosophy, Business Cycle
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EC120 Full Course Notes
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Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories. The scientific method: observation, theory, and more observation. E. g. economist might live in a country experiencing rapid increases in price and develop a theory of inflation. Might assert that high inflation arises when government prints too much money. To test this theory, economist could collect and analyze data on prices and money from many different countries. Although economists use theory and observation like scientists, they cannot experiment (obstacle) - it is often difficult. Economists make assumptions since it simplifies the complex world and makes it easier to understand. E. g. to study effects of international trade, we assume world only has 2 countries. Economists use different assumptions to answer different questions. E. g. economists want to study what happens to economy when government changes number of dollars in circulation. Important piece in analysis is how prices respond.
