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.

Question

Quizplus · Accepted Answer

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.

An Economic Model