Which of the following statements about economic models is TRUE?
A) Economic models are not empirically testable.
B) The predictive power of models is not as important as they serve the preferences of economists.
C) Economic models are designed so that every detail of the real world can be analyzed.
D) Every economic model is based on a set of assumptions.

Question

Quizplus · Accepted Answer

Every economic model is based on a set of assumptions. These assumptions are necessary simplifications of the real world, and they allow economists to isolate the effects of different variables and make predictions. However, these assumptions may not always hold true in reality, which limits the accuracy and applicability of economic models.

Which of the Following Statements About Economic Models Is TRUE