To Abstract from Reality in an Economic Model Means That

question 98

Multiple Choice

To abstract from reality in an economic model means that

• A) we include only a few of the essential aspects of reality.
• B) the economic study surveys only a very limited period of time.
• C) we include only those elements which support our hypothesis.
• D) the model includes every aspect of the real world.
• E) the model examines the actions of the consumers in the absence of producers and the government.

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Definitions:

Exchange Rate

The rate at which one currency can be exchanged for another, determining how much of one currency is needed to purchase a unit of another currency.

Spot Trade

An agreement to trade currencies based on the exchange rate today for settlement in two days.

Exchange Rate

The rate at which one currency can be exchanged for another, usually used in international trade and finance.

Counterparty

Second borrower in currency swap. Counterparty borrows funds in currency desired by principal.