In constructing models, economists
A) consider all factors that can change.
B) include all available information.
C) attempt to duplicate the real world.
D) make simplifying assumptions.
Answer: D
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Assume mortgages and houses are complements in consumption; if the price of mortgages decreases (decreases in interest rates), we would expect to see
a. An increase in demand for houses b. An decrease in demand for houses c. An increase in the quantity of houses demanded d. An decrease in the quantity of houses demanded
If the quantity demanded of milk is 55,000 and the quantity supplied of milk is 80,000, then:
a. there is an excess supply of 25,000 units of milk. b. the price of milk will tend to rise to clear the market. c. consumers get the milk they want so market equilibrium exists. d. there is an excess demand of 25,000 units of milk. e. this is the intersection of market supply and demand curves.