Which of the following statements is true? a. The word theory means same for both economists and laymen. b. Abstraction forms an important part of economic analysis. c. Economic theory does not make unrealistic assumptions. d. Economists should not ignore details while focusing on complex problems.

Question

Bentley Clay

Business

22 March, 03:28

Which of the following statements is true? a. The word theory means same for both economists and laymen. b. Abstraction forms an important part of economic analysis. c. Economic theory does not make unrealistic assumptions. d. Economists should not ignore details while focusing on complex problems.

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Answers (1)

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Rebecca Austin · Answer 1

B) Abstraction forms an important part of economic analysis.

Explanation:

Economic abstraction refers to ignoring certain factors while doing economic analysis. Some minor or even important economic details must be assumed when trying to analyze certain situations. That is why economists love to use ceteris paribus (everything else constant). Macroeconomic theory is impossible to prove in a scientific way, only certain microeconomic theories can be tested scientifically. In order to perform macroeconomic analysis, economists must simplify the real world, since economy is too complex and has too many factors that can alter any possible analysis. It is impossible to analyze a nation's economy as a whole since millions of people and businesses make billions of economic decisions very day.