Economists Make Assumptions Because

question 119

Multiple Choice

Economists make assumptions because

• A)they need to incorporate value judgments into their models.
• B)analysis without assumptions would be impossibly complex.
• C)they always have imperfect information about reality.
• D)assumptions are the final product of careful economic analysis.
• E)assumptions allow economists to ignore things that they cannot explain.

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Definitions:

Prepaid Expenses

Payments made in advance for goods or services to be received in the future, recorded as assets on the balance sheet until they are consumed or used.

Indirect Method

A method of presenting the operating activities section of the statement of cash flows that adjusts net income to compute cash flows from operating activities.

Net Income

The net income of a company, which is the remaining amount of total revenue after deducting all expenses and taxes.

Inventory

The total amount of goods and materials held by a company intended for sale or production.