The Best Way to Determine If the Assumptions of an Economic

question 31

Multiple Choice

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.

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Definitions:

Novel Idea

A unique or original concept, thought, or innovation that has not been previously considered or explored.

Performance Problems

Issues or challenges that hinder an individual's or a group's ability to achieve expected results or standards.

Rules of Thumb

Simple, heuristic principles or guidelines that provide practical advice for making quick, approximate decisions or solving problems.

Uncertainty

The condition of being unsure about something or lacking complete information or knowledge about outcomes, often leading to hesitation or caution in decision-making.