An Economic Model That Contains a Highly Realistic Set of Assumptions

question 18

Multiple Choice

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

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

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Definitions:

Accrued

Refers to incomes or expenses that have been incurred but not yet recorded in the financial statements due to the timing of cash flows.

Enhancing Quality

The process of implementing measures and practices that improve the quality of products, services, or processes.

Materiality

An accounting principle that means the significance of financial information to decision-making; insignificant details are disregarded.

Comparability

A characteristic of accounting information that allows users to analyze two or more periods of financial data or companies to identify trends and differences.