If Two Competing Models Are Offered to Explain a Certain

question 258

Multiple Choice

If two competing models are offered to explain a certain economic phenomenon, the better model is the one

• A) that is the newest since newer models are better than old models.
• B) with the fewest unrealistic assumptions.
• C) that more often predicts with most accuracy.
• D) that is not subject to empirical verification.

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Definitions:

Interest Rate Swaps

A financial derivative instrument involving the exchange of interest payments between two parties on a specified principal amount.

Option Contract

An agreement that gives the holder the choice, but not the obligation, to buy or sell an underlying asset at a set price on or before a certain date.

Foreign Currency

Currency used in a country other than one’s own, reflecting the economic practices and transactions in foreign nations.