Just like models constructed in other areas of science, economic models
a. incorporate assumptions that contradict reality.
b. incorporate all details of the real world.
c. complicate reality.
d. avoid the use of diagrams and equations.
a
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Explain why equalizing the marginal utility per dollar for all goods maximizes utility
What will be an ideal response?
An increase in autonomous spending is sure to reduce the real money supply when
A) the economy is in the liquidity trap. B) the IS curve is vertical. C) the economy is at full employment. D) velocity is constant.
In 1995, the Boskin commission identified which of the following problems with the computation of the CPI?
A) it does not account for the fact that consumers can substitute away from products as they get more expensive B) an increase in price could be the result of quality improvements rather than an increase in the cost of living C) it often does not reflect decreases in the cost of living that occur when new goods are introduced D) all of the above E) none of the above
For a monopoly, when the price effect outweighs the quantity effect of increased production:
A. total revenues will increase. B. the demand must be price inelastic. C. marginal revenue must be increasing. D. All of these statements are true.