Economic Models

question 91

Multiple Choice

Economic models

• A)are people who act out the behavior of firms and households so that economists can study this behavior.
• B)are usually detailed replications of reality.
• C)incorporate simplifying assumptions that often contradict reality,but also help economists better understand reality.
• D)are useful to researchers but not to teachers because economic models omit many details of the real-world economy.

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Definitions:

Intrinsic Value

The actual value of a company or an asset based on underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.

P/E Multiple

Price-to-Earnings ratio, a valuation metric calculated by dividing the current market price of a stock by its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

EPS

Earnings Per Share; a company's profit divided by its number of common outstanding shares, indicating the company’s profitability.

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamentals and independent of market price.