Select the BEST Statement About Economic Models

question 177

Multiple Choice

Select the BEST statement about economic models.

• A) An economic model should not generate predictions about actual events in the real world, since it discusses only abstract events.
• B) An economic model will be discarded if its predictions are often in conflict with the facts.
• C) An economic model must always be correct in its predictions or it must be discarded.
• D) All economic models are false.

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Definitions:

Swaps

Financial derivatives where two parties exchange financial instruments or cash flows for a set period according to specified terms.

Economic Benefit

The gain received by an entity as a result of an action taken or a decision made, which contributes to the entity's wealth.

Transactions Rationale

The underlying reasons or business logic behind carrying out specific transactions within a company.

Effective Interest Rate

The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period to the net carrying amount of the financial asset or financial liability.