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

Question

Quizplus · Accepted Answer

Economic theories are tested by comparing their predictions with real-world observations. This process involves gathering data, analyzing it, and evaluating whether the theory accurately reflects the observations. The closer the theory's predictions match the real-world outcomes, the stronger the theory's validity. Assessing the realism of assumptions is important, but it is not sufficient to test an economic theory. Similarly, comparing the simplicity of economic theories does not determine their accuracy or validity. Polling economists is also not a reliable method for testing an economic theory, as consensus among experts does not necessarily equate to empirical validation.

How Is an Economic Theory Tested