Asked by Britney Hicks on Jun 28, 2024
Verified
An economic model:
A) is useful for explaining past economic conditions but not for predicting future outcomes.
B) often leads to faulty conclusions because of the ceteris paribus assumption.
C) allows nothing to change in the economic situation that is being described.
D) is a simplified version of reality used to understand real-world economic conditions.
Economic Model
A theoretical construct that represents economic processes by a set of variables and a set of logical or quantitative relationships between them.
Economic Conditions
The state of various factors that influence an economy at a given time, including inflation rates, unemployment levels, and the rate of economic growth.
Ceteris Paribus
A Latin phrase meaning "all other things being equal," used in economics to analyze the effect of one variable on another, holding all other relevant factors constant.
- Attain insight into the construction and importance of economic models for deciphering real-world complexities.
- Identify the conditions under which economic models can predict future outcomes or explain past phenomena.
Verified Answer
MA
Mahmoud AljohaniJul 02, 2024
Final Answer :
D
Explanation :
An economic model is a simplified version of reality used to understand real-world economic conditions. While it may not capture all complexities of a real-world system, it helps to identify key variables and relationships and can be used to make predictions and policy recommendations. The ceteris paribus assumption is used to isolate the effects of specific changes on the model's outcomes.
Learning Objectives
- Attain insight into the construction and importance of economic models for deciphering real-world complexities.
- Identify the conditions under which economic models can predict future outcomes or explain past phenomena.