Which of the Following Statements Concerning Economic Models Is FALSE

question 46

Multiple Choice

Which of the following statements concerning economic models is FALSE?

• A)Economic models must provide usable predictions.
• B)Economic models are based on pure fact and no assumptions.
• C)Economic models are tested empirically.
• D)Economic models relate to how people behave.

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Definitions:

Discount Factor

A factor employed in the discounted cash flow (DCF) methodology to calculate the current value of anticipated cash flows.

Payback Period

The length of time it takes for an investment to generate cash flows sufficient to recover the initial cost of the investment.

Initial Investment

The initial amount of money invested in a project or business, often used to start or acquire it.

Incremental Annual Revenues

The additional revenue a business generates from making specific changes, such as launching a new product or entering a new market, on an annual basis.