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8 May, 2015 - 10:23

A inverse (or negative) relationship occurs when two variables change simultaneously in opposite directions. The curve of an inverse relationship is downsloping when viewed from left to right.

Review Quiz

  1. A set of actions undertaken by a government to alleviate a problem or to further a society's goal, is known as a...........
  2. That part of economics which is concerned with the behavior of specific economic units, such as firms or individuals, is ..............
  3. One of the pitfalls of economic thinking, which consists in asserting that what is true for one is true for all, is also known as
    1. fallacy of composition,
    2. ceteris paribus,
    3. generalization,
    4. inference.
  4. Simplifications, generalizations, abstractions and statements of what is given, are all
    1. assumptions,
    2. principles,
    3. hypotheses,
    4. all answers are correct.
  5. Which of the following is not usually considered as an economic goal?
    1. maintaining price stability,
    2. preventing terrorism,
    3. achieving high level of employment,
    4. striving for equity in income distribution.
  6. The assumption that everything else remains unchanged, is known as
    1. ceteris paribus,
    2. rigidity,
    3. fallacy of composition,
    4. inflexibility.
  7. That part of economics which is concerned with the economy as a whole, is known as ..............
  8. The name given to that part of economics, in which facts relevant to a certain problem are gathered in order to derive principles, is ............ economics.
  9. Two causally related variables which move in opposite directions (i.e. one increases while the other decreases) are said to have a relationship which is
    1. discretionary,
    2. indirect,
    3. inverse,
    4. opposite.
  10. A proposition which needs to be tested with empirical data before it becomes an accepted principle, is known as a ................
  11. Two causally related variables which increase and decrease together have a relationship which is
    1. inverse,
    2. direct,
    3. fractional,
    4. derivative.


  3. B
  4. A
  5. B
  6. A
  9. C
  11. B


Describe the methodology of the economic science. Show how theories are developed and how they are applied.