When Constructing an Economic Model,economists

question 130

Multiple Choice

When constructing an economic model,economists:

• A)rely mostly on their own value judgments and ignore the far more complex world of facts.
• B)always try to duplicate reality by including all available information.
• C)use assumptions that are true for the individual but never true for the whole economy.
• D)must rely on assumptions for the sake of simplification.
• E)are primarily concerned with making realistic assumptions.

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Definitions:

Diversify Risk

The strategy of spreading investments across various sectors or assets to reduce the overall risk exposure.

Operating Leases

Agreements that allow one to use an asset for a specified period without owning it, typically with lower monthly payments than a finance lease.

Zero Cash Balances

A company's financial situation where the cash account balance reaches zero, often intentionally managed through cash sweep accounts to optimize liquidity.

Debt Capital

Funds borrowed by an entity that must be repaid over time, typically with interest.