An economic theory is tested by:
A)assessing the realism of its assumptions.
B)polling economists to see if there is consensus as to the validity of the hypothesis.
C)comparing and contrasting its simplicity with related theories.
D)comparing its predictions with real-world data.

Question

An economic theory is tested by:
A)​assessing the realism of its assumptions.
B)​polling economists to see if there is consensus as to the validity of the hypothesis.
C)​comparing and contrasting its simplicity with related theories.
D)​comparing its predictions with real-world data.

Quizplus · Accepted Answer

The best way to test an economic theory is by comparing its predictions with real-world data. This way, we can examine whether the theory accurately predicts and explains the behavior of the economy in reality. Assessing the realism of its assumptions is important too, but it alone is not enough to test the theory's accuracy. Polling economists can provide insights and opinions but it is not considered a valid method for testing an economic theory. Similarly, simply comparing and contrasting its simplicity with related theories does not provide enough empirical evidence to support or refute an economic theory.

An Economic Theory Is Tested By