On what basis is the best test of an economic theory?
A) on the accuracy of its assumptions
B) on the rigour of its mathematical formulation
C) on the ability of it to explain and predict
D) on the level of real-world detail it captures

Question

Quizplus · Accepted Answer

The best test of an economic theory is on its ability to explain and predict real-world phenomena. While accuracy of assumptions and mathematical formulation are important, they are not sufficient if the theory cannot accurately explain and predict real-world behavior. The level of real-world detail captured is also important, but again, only as it relates to the theory's ability to accurately explain and predict.

On What Basis Is the Best Test of an Economic