Which of the Following Statements Is True

question 69

Multiple Choice

Which of the following statements is true?

• A) Models that economists use are perfect replicas of reality.
• B) The scientific method used by economists is based on idealism and not empiricism.
• C) Models help economists explain the past but do not help predict the future.
• D) Testing with data enables economists to distinguish between good models and bad models.

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Definitions:

Discount Rate

The discount rate applied in DCF analysis to calculate the current worth of anticipated future cash flows.

Option To Wait

A strategic decision opportunity in investment where the investor can delay an investment decision to gather more information or for conditions to improve.

Soft Capital Rationing

Internal constraints imposed by a company's management on the funds allocated for new investments, often due to budgetary constraints.

Financial Markets

Financial markets are platforms where individuals and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices reflective of supply and demand.