To Abstract from Reality in an Economic Model Means That

question 24

Multiple Choice

To abstract from reality in an economic model means that:

• A) only essential aspects of reality are included.
• B) the economic study surveys only a very limited period of time.
• C) we include only those elements which do not support our hypothesis.
• D) the model includes some non-important aspect of the real world.

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Definitions:

Lender Of Last Resort

An institution, typically a country's central bank, that offers loans to banks or other financial institutions that are experiencing financial difficulty or are considered highly risky.

Open-Market Purchase

The buying of government securities by the central bank from the market to increase the money supply and decrease the interest rate.

Store Of Value

An asset that can be saved, retrieved, and exchanged in the future without significantly losing value.

Currency

The system of money in common use in a country, which facilitates the exchange of goods and services.