Explain about theoretical investigation, Microeconomics

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Assume you see that two macroeconomic variables are correlated with each other.  But you want to know if there's an underlying or causal relationship between the two variables.  Would you use an empirical or theoretical investigation?  Explain why.

You would use a theoretical investigation.  Empirical investigation is useful in explaining macroeconomic phenomenon, but might be inadequate in explaining them.  It might be clear that two variables are correlated, but unclear if there's a causal relation among the two.  Theoretical investigation can more closely study complex relationships among phenomena.   

 


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