An Economic Model Is Useful If It

question 54

Multiple Choice

An economic model is useful if it

• A)includes every detail of reality
• B)involves no unproven assumptions
• C)is expressed in equations
• D)makes accurate predictions
• E)is simple enough to be understood by a child

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Definitions:

Residual Income

Residual Income is the amount of income that an entity generates after accounting for the cost of capital, measuring the profitability exceeding the required return on investments.

Investment Opportunity

A potential financial investment that may yield returns, including stocks, bonds, real estate, or starting a new business venture.

Return On Investment

A profitability ratio that calculates the return gained on an investment relative to the investment’s cost.

Investment Opportunity

Investment Opportunity is a term used to describe a business, project, or asset that has the potential to generate significant financial returns or profits.