Which Statement About Economic Models Is TRUE

question 123

Multiple Choice

Which statement about economic models is TRUE?

• A) In practice, it is easy for an economist to isolate economic variables.
• B) Economists hold all other variables constant in order to see the impact of one particular variable.
• C) To be useful, an economic model must include every detail possible and not be an abstraction.
• D) Complex models are always better than simple ones.

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Definitions:

Earnings Expectations

The anticipated earnings reported by a company, influencing its stock price and investor perception.

Information Processing Errors

Mistakes made in analyzing and interpreting information which can lead to incorrect conclusions and potentially suboptimal decision-making.

True Probabilities

The actual likelihood of an event occurring, as opposed to estimated probabilities based on theoretical models or assumptions.

Information Processing

The process of gathering, storing, and manipulating data to produce meaningful information.