ECON 1BB3 Chapter 2: Chapter 2 Thinking Like An Economist

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Specialization and trade are all around us: between individuals within families, between firms and consumers, between canada and china. Economists devise theories, collect data, and analyze data to verify or refute theories. The scientific method: observation, theory, and more observation. Living in a country experiencing rapid increases in prices develop a theory of inflation: high inflation from government printing too much money (?) Collect data and analyze data on prices and money from many different countries. Unable to generate data, but must use data given can"t manipulate a nation"s monetary policy. Assumptions can simplify the complex world and make it easier to understand: ex. Assume that the world consists of only two countries, and that each country produces only two goods. Art of scientific thinking deciding which assumption to make: ex. What happens to the economy when government changes the # of dollars in circulation. Assume short run effects prices do not change much.