Author Question: How do economists try to disentangle cause and effect? What will be an ideal ... (Read 80 times)

arivle123 · **on:** Jun 29, 2018

How do economists try to disentangle cause and effect?

What will be an ideal response?

Question 2

How can economic growth help a country combat brain drain?

A) Economic growth combined with decreasing returns to human capital require workers to achieve steadily higher and higher levels of education over time.
B) Economic growth opens up opportunities for better jobs and higher incomes for skilled workers.
C) Economic growth allows highly skilled persons to earn more in a foreign country than in their native country.
D) Economic growth increases the incomes of low-skilled workers relative to high-skilled workers.

leahchrapun · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Economists use models to understand some aspect of the economic world. Testing the predictions of models makes it necessary to disentangle cause and effect. To overcome this problem, economists have three methods of testing their models: Using a natural experiment, using a statistical investigation, and using economic experiments. A natural experiment is a situation that arises in the ordinary course of life in which one factor being studied varies and the other factors are the same. This method allows the economist to focus on the effect from the factor that differs between the two situations. A statistical investigation looks for correlations between variables but then determining whether the correlation actually reflects causation can be difficult. An economic experiment puts people into decision making situations and then varies the relevant factors one at a time to determine each factor's effect.

Answer to Question 2

B