Economists Build Models That Abstract from the Complexities of Reality

question 134

Multiple Choice

Economists build models that abstract from the complexities of reality because

• A)it is easier to do so.
• B)they believe they gain a greater understanding of reality.
• C)economists are not interested in reality.
• D)economists do not understand the real world.
• E)the complexities of reality are unimportant.

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Definitions:

Annual Net Cash Inflow

The net amount of cash that flows into a company in a year after all expenses and outflows have been subtracted from total inflows.

Capital Rationing

The process of selecting the most profitable projects to invest in when a company has limited resources or capital available.

Present Value

The present value of anticipated future cash flows or sums of money, calculated with a given rate of earnings.

Net Cash Flow

The difference between a company's cash inflows and outflows during a specific period, providing insight into its financial health and liquidity.