An Economic Model

question 136

Multiple Choice

An economic model:

• A) exactly explains what happens in the real economy.
• B) discards unnecessary details to clearly demonstrate the central principles of the economic activity.
• C) approximates all facets of what happens in the real economy.
• D) does not make clear assumptions about the economic activity.

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Definitions:

Corporation

A business organization that is a separate legal entity from its owners, the shareholders.

Tax Advantages

Financial benefits that arise from the application of tax laws, such as deductions or credits, which reduce tax liability.

Shareholders

Individuals or entities that legally own one or more shares of stock in a public or private corporation.

Incorporation

Incorporation is the process of legally forming a corporation or company, which is then recognized as a separate legal entity from its owners.