The best way to determine if the assumptions of an economic model are appropriate is to
A)examine whether they are consistent with common sense.
B)determine whether they are similar to assumptions used in other economic models.
C)test them by comparing the predictions of the model to actual data.
D)consider whether the assumptions are simple enough to be understood by users of the model.

Question

Quizplus · Accepted Answer

The best way to determine if the assumptions of an economic model are appropriate is to test them by comparing the predictions of the model to actual data. This helps to determine if the assumptions are accurate and realistic in explaining the behavior of real-world phenomena. Examining whether the assumptions are consistent with common sense or whether they are similar to assumptions used in other economic models may be helpful, but ultimately testing the assumptions against actual data is the most effective way to determine if they are appropriate. Considering whether the assumptions are simple enough to be understood by users of the model is not necessarily a reliable indicator of their appropriateness.

The Best Way to Determine If the Assumptions of an Economic