To be valid, an economic model must:
A) include every activity which occurs in the real world.
B) include at least 85 percent of the activity which occurs in the real world.
C) be able to predict events occurring in the real world.
D) exclude any link to the real world.
E) not be based on an abstraction of the real world.

Question

Quizplus · Accepted Answer

A valid economic model must be able to predict events occurring in the real world. It does not need to include every activity, nor does it need to exclude any link to the real world. It is often based on an abstraction of the real world, which helps simplify complex phenomena and make them more understandable. However, the ability to make accurate predictions is what ultimately determines the validity of an economic model.

To Be Valid, an Economic Model Must