Is It Possible to Express an Economic Model in Words

question 144

Multiple Choice

Is it possible to express an economic model in words without diagrams?

• A)No, models can only be stated in diagrams.
• B)No, the very definition of model requires mathematical form.
• C)Yes, some of the simplest models are verbal statements.
• D)Yes, although the best models always use diagrams.
• E)Uncertain, economic theory has not answered this question yet.

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Definitions:

Put Option

A legal document that grants the possessor the option to offload a specified quantity of a specific asset at a fixed price during a defined period, without any mandatory commitment to sell.

Expiration

The end of the life of a financial instrument or contract, after which it must either be settled by delivery of the underlying assets or closed.

Dividend Paying

A characteristic of companies that regularly distribute a portion of their profits to shareholders.

Strike Call

A term that is likely confused with "call option," which is a financial contract giving the buyer the right, but not the obligation, to buy a stock or other asset at a predetermined price (the strike price) within a specific time frame.