Einstein Was Quoted Saying "Everything Should Be Made as Simple

question 8

Multiple Choice

Einstein was quoted saying "Everything should be made as simple as possible,but not simpler." When it comes to economic models this means that

• A) models shouldn't be too complex.
• B) models shouldn't be too simple.
• C) models should have a level of abstraction appropriate to the topic investigated.
• D) All of the above.

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Definitions:

Mental Accounting

A concept in behavioral finance where individuals classify, interpret, and prioritize money, often leading to irrational decision-making.

Fundamental Risk

The risk associated with inherent operational, financial, and market factors affecting an investment.

Managerial Overconfidence

Managerial Overconfidence describes a bias where managers overestimate their ability to generate positive outcomes, impacting decision-making and corporate strategy.

Breadth

A market indicator used in technical analysis that helps determine the breadth of market participation in a price move.