Which of the Following Statements About Economic Models Is True

question 322

Multiple Choice

Which of the following statements about economic models is true?

• A) A good economic model is complex.
• B) A good model does not rely on any assumptions.
• C) Every model is based on a set of assumptions.
• D) Economic models are designed to explain what people need.

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Definitions:

Natural Rate

The natural rate often refers to the natural rate of unemployment, which is the level of unemployment consistent with a stable inflation rate over time.

Phillips Curves

A graphical representation indicating the inverse relationship between the rate of unemployment and the rate of inflation in an economy.

Expected Inflation

The anticipated rate at which the general level of prices for goods and services will rise over a period.

High Inflation

A situation where there is a sustained, rapid increase in the general price level of goods and services in an economy over a period, eroding purchasing power.