If a Theory's Predictions Are Incorrect

question 20

Multiple Choice

If a theory's predictions are incorrect,

• A)then economists always reject it.
• B)then the data used was clearly faulty.
• C)then economists will likely reduce their confidence in the theory.
• D)then the model must be too simple.

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Definitions:

Margin Account

Margin Account is a brokerage account which allows investors to borrow money to buy securities, using the purchased securities as collateral for the loan.

Borrowed Funds

Money that an entity borrows from another to finance its operations, investments, or other expenditures that must be repaid with interest.

Report Rates

The interest rates reported by financial institutions, often related to loans or deposits, to regulatory bodies or in their financial statements.

LIBOR

The London Interbank Offered Rate is a standard interest rate used by leading international banks for loans to each other.