Macroeconomic Theories

MacroeconomicTheories

Whyis it Difficult to Test ?

Thereare two main reasons that make it difficult to test macroeconomictheories. Firstly, it is not possible to conduct an experiment.Macroeconomics theories involve real world phenomena and they cannotbe replicated experimentally (McEachern,2012).For instance, a theory stated that Bush tax cuts prevented economygrowth in 2000 one cannot go back in history and conduct the sameexperiment. One can only conduct an experiment that can occur infuture but not in the past.

Secondly,there are so many confusing variables in the real world. This createsa causal connection between the macroeconomic policy and the policycondition that it causes. Similarly, it is difficult to state theexact variable in the theory. As a result, many similar variables canhave a great impact on the economy hence, it is complicated toconduct an experiment that can isolate the effect of one independentvariable. Therefore, it is difficult to test macroeconomic theories.

Reference

McEachern,W. A. (2012). ECON Macro 3 (3rd ed.). Mason, OH: South-Western.