An Economic Model That Contains a Highly Realistic Set of Assumptions

question 63

Multiple Choice

An economic model that contains a highly realistic set of assumptions is

• A)useful because there is then very little difference between "theory" and "reality."
• B)necessarily better able to predict the future.
• C)certainly superior to a model whose assumptions are somewhat unrealistic.
• D)more abstract than a model whose assumptions are further removed from reality.
• E)not likely to be useful because of its particularized nature and its complexity.

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Definitions:

Merchandise

Goods bought for resale in the course of business, typically in a retail or wholesale establishment.

Payments

The act of transferring money in exchange for goods or services, or to settle debts.

Inventory System

A mechanism for tracking and managing items that a company holds in stock, covering aspects like ordering, storing, using, and selling these goods.

Perpetual

Continuing indefinitely without a predetermined end in the context of perpetual inventory systems that continually update to reflect buying and selling activities.