Which of the following statements about economic methodology is correct?
A)An economic law is a cause-and-effect relationship that has been verified by a controlled experiment.
B)The test of a theory's validity is its usefulness in explaining reality.
C)An economic law is a statement about group behavior that is based on the observed behavior of a single individual.
D)An economic law, because it is based on probabilities, can only be expected to be true about half the time.
E)Assumptions are ignored in the development of hypotheses.

Question

Quizplus · Accepted Answer

The test of a theory's validity is its usefulness in explaining reality. Economic laws are based on observed behavior of groups, not just individuals. Economic laws are not based on probabilities, but rather are statements of what is likely to happen in the absence of other factors. Assumptions are a necessary part of developing hypotheses.

Which of the Following Statements About Economic Methodology Is Correct