Economic models can never be perfectly realistic as they are simplifications of complex real-world systems. However, they can still be useful in analyzing certain aspects of the economy and making predictions or policy recommendations. As long as the assumptions made in the model are clearly stated and the limitations of the model are acknowledged, it can still provide valuable insights.

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Economic Models

Question 35

Multiple Choice

Economic models

A) cannot be useful if they are based on false assumptions.
B) were once thought to be useful, but that is no longer true.
C) must incorporate all aspects of the economy if those models are to be useful.
D) can be useful, even if they are not particularly realistic.

Correct Answer: