Question : 31) Suppose economists at the World Bank discover a positive : 1384129

31) Suppose economists at the World Bank discover a positive correlation between family income and female education levels in developing countries. We can say that

A) the correlation is inconsistent with a theory that an increase in female education levels causes an increase in family income.

B) an increase in family income causes an increase in female education levels.

C) an increase in female education levels causes an increase in family incomes.

D) there is a causal relationship between family income and female education.

E) the observed correlation is consistent with a theory that an increase in female education levels causes an increase in family income.

32) Suppose economists at the Department of Finance in Ottawa employ an economic model that predicts the effects of an increase in the GST. After implementation of the change, researchers find that the empirical data rejects the prediction. They are likely to

A) modify the prediction in light of the new evidence.

B) ignore the empirical evidence and continue using the model.

C) modify the theory in light of this newly acquired empirical knowledge.

D) reject the empirical data as faulty because it did not support the theory.

E) modify the data to suit the definitions and assumptions.

33) Suppose economists at the World Bank develop a theory with a prediction that increased levels of foreign aid lead to increases in per capita GDP in the recipient developing countries. They find empirical evidence that is consistent with this theory. The economists are able to conclude that

A) the evidence fails to reject the theory.

B) the theory has been proven correct.

C) the theory is always reliable.

D) the evidence is rejected by the theory.

E) the assumptions used in the theory have been proven correct.

34) When using statistics in economics, the possibility of error

A) cannot be eliminated.

B) cannot be controlled.

C) cannot be evaluated.

D) is not considered to be important.

E) can be eliminated with more sophisticated statistical techniques.

35) Suppose that a particular theory predicts that on sunny days consumption of ice cream will rise and that on cloudy days consumption of ice cream will fall. If an economist tests this theory and finds that over a six-month period the theory predicts accurately, the economist would likely say

A) the theory has been proven correct.

B) the theory is always reliable.

C) the evidence fails to reject the theory.

D) the theory shouldn’t be taken seriously.

E) that the theory is not useful because consumption involves irrational human behaviour.

36) A hypothesis (or a prediction) is a statement about

A) how assumptions affect theories.

B) those things which we believe to be true, but cannot prove.

C) what will happen in the future.

D) the relationship between facts explained by the hypothesis.

E) how two or more variables are related to each other.

37) A scientific prediction is

A) not testable.

B) a prophesy of how the future will unfold.

C) a causal statement of the following form: A will occur because B occurred.

D) a conditional statement of the following form: if A occurs, then B will follow.

E) always based on the law of large numbers.

38) Of the following, which is the most important characteristic of a successful theory?

A) the theory provides a basis for facts about economic behaviour

B) the theory could never be refuted

C) the theory adequately explains all economic behaviour

D) all assumptions on which the theory is based are true

E) the theory allows us to predict behaviour reasonably accurately

39) The assumptions of a theory

A) must be realistic if the theory is to be of any use.

B) are not necessary for the scientific approach.

C) are indirectly refuted if and when the theory itself is rejected by empirical observation.

D) are supposed to be as unrealistic as possible.

E) are assumed to be true even when empirical observation rejects the predictions of the theory.

40) The scientific approach to economic inquiry involves

A) choosing data that will support the predictions.

B) using only endogenous variables in economic models.

C) testing the predictions with empirical data.

D) testing the reality of the assumptions of the model.

E) using only independent variables.