Economic Models Are Only Useful in Analyzing Government Policy

question 7

Multiple Choice

Economic models are only useful in analyzing government policy.

• A) True. Individuals are irrational and therefore economic models are useless.
• B) False. Economic models can be used to predict individual and firm behavior.
• C) True. Economists only model those questions for which they are hired.
• D) False. Economic models are not even useful in analyzing government policy.

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Definitions:

GDP Deflator

A gauge for pricing of all new, native-produced, conclusive goods and services within an economy, applied to revise nominal GDP in order to compute real GDP.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by a country in a specific period in real terms.

Percentage Change

A mathematical calculation that determines the degree of change over time as a proportion of the original value, often used to measure growth or decline in economic data.

Real GDP

The calculation of a nation's economic production accounting for variations in prices, representing the actual value of all goods and services generated.