The basic purpose of economic models is to
a. construct simplifying assumptions about the real world
b. explain reality in all its complexity
c. collect empirical data to support the facts
d. construct situations where controlled experiments can be carried out
e. provide explanations for, and predictions of, economic events
QUESTION 2A good economic theory
a. has realistic assumptions
b. contains as much detail as possible
c. cannot be proven false
d. predicts well
e. can only be presented in mathematical terms
QUESTION 3Economic theories are
a. useful because they are as exact as theories in the physical sciences
b. useless because they are based on abstractions
c. useful because they allow us to make predictions
d. too complex to understand because they include all of reality
e. useful in predicting events only if their assumptions are realistic
QUESTION 4An economic model
a. omits critical elements
b. must be presented in mathematical terms
c. simplifies reality in order to focus on its essential elements
d. can never be proven wrong if its assumptions are realistic
e. produces poor predictions if it includes an unrealistic assumption
QUESTION 5An economic model
a. always has a mathematical foundation
b. can never be proven wrong
c. can be constructed for an individual economic unit but not for the economy as a whole
d. is a simplification of the real world
e. can be constructed for the economy as a whole but not for an individual economic unit
QUESTION 6Theory seeks to
a. simplify a complex reality
b. confront reality in all its complexity by focusing on the unique aspects of each phenomenon
c. explain phenomena without predicting them
d. predict phenomena without explaining them
e. distort reality in order to improve forecasting ability
QUESTION 7Theory in economics
a. involves some simplification of reality
b. bears no relation to reality
c. approaches reality in all its complexity
d. involves so much distortion of reality that it is worthless
e. focuses on the unique aspects of each situation
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