NOAA PMEL predictions for winter El Nino climate changes based on a statistical analysis of data. ECONOMIC MODELS Economic modeling is at the heart of economic theory. COMMUNISM You have 2 cows. The Euro was not an By Daniel Richards, Manzur Rashid, Peter Antonioni . This will make it much easier for us to examine it and actually learn something. An economic model is essentially a simplified framework for describing the workings of the economy. It's asking us Why do economists use models? how would the world change relative to some counterfactual if we assume a change in this or that variable) … The more accurate and precise the model is, the clearer the picture it projects. You give one to your neighbour. What fiscal policy is effective at zero interest rates? Booster Classes. There can be many answers to this question. In this new world of computer modelling, an oft-quoted remark made in the 1970s by the statistician George Box remains a useful rule of thumb: ‘all models are wrong, but some are useful’. Models are created and used for two main purposes:– Simulations: how would a country, region or the world change relative to a counterfactual if we assume a change in one or another variable? Moreover, as they note, economists are studying and trying to explain a wide and expanding array of activities, ranging from international trade to unemployment and inflation, from investing retirement funds to controlling pollution. To be fair, the critics may have a point. Answer Economic models are useful because they help analyze behavior and predict outcomes in a clear, simple way based on a set of assumptions that can be listed in a table, illustrated with a graph, or even stated algebraically. Thanks in advance . The evolution of macroeconomic models had relatively little effect on policymaking until the middle part of this decade. Health officials and policymakers responded to projections of COVID-19 models — however uncertain they were — by taking remedial measures. What Use is Economic Theory? When the evidence is consistent with the theory that A causes outcome B, there is confidence in the theory's validity. WHY did no one see it coming, asked the Queen at the height of the financial crisis in 2008. Different schools of economic thought exist because _____. Discuss why groups and community rating are useful tools to deal with the self-selection problem. share. Here we list several examples showing why and when statistical models are useful. Use of Models in Economics! Switch to. Booster Classes. Because of that the importance of economic models is often underestimated. Your dashboard and recommendations. Lv 4. The forecasts that come out of them are different from data or statistics about past events. In the post-war period, economics became increasingly mathematical with economists attempting to use mathematics to explain models and theories. At this point it is important to note that. Yet they are often subject to criticism, mostly because many of them are said to be. The economic elites of most advanced nations now believe that the United States offers the best model for competing in the new global economy. The State takes both and sells you some milk. And economists use this model because, okay, simply put, mix okay, complex problems complex really from's, I should say simple enough to be analyzed. WHY did no one see it coming, asked the Queen at the height of the financial crisis in 2008. CGE models use economic data (see Annex) to simulate how an economy might react to changes in policy or other external shocks, such as changes in labor force participation of women. The less expensive the apples, the more are demanded. Sometimes even looking at what is not included can help us understand what a topic is all about. What is the purpose of a model in science? offer solutions to economic problems. 1. 0 0. ashton. This problem has been solved! By Raphael Zeder | Updated Jun 26, 2020 (Published Oct 7, 2014) Models are a very important tool when it comes to understanding economic principles. Trending Questions. 1 comment. Instead a good model will omit certain details and build on certain assumptions. 1. Next it should deal with important economic facts, providing a framework for important issues. This problem has been solved! Economic models can be such powerful tools in understanding some economic relationships, that it is easy to ignore their limitations. Why can't economic models judge whether policies are good or bad? Economic impact analyses are sometimes called “cost of illness estimates,” “impact analyses,” or “economic burden estimates.” These analyses estimate the total costs incurred by a disease or illness. They provide qualitative answers to specific questionssuch as the implications of asymmetric information (when one side to a transaction knows more than the other) or how best to handle market f… These models are based on perfect information, an identical product, and inability of individual agents to significantly affect total output or demand. Economics, social science that seeks to analyze and describe the production, distribution, and consumption of wealth. Whether it is a useful model depends on a number of factors. Our educators are currently working hard solving this question. Why can't economic models judge whether policies are good or bad? Comprehensive models of macroeconomic relationships are used by central banks and governments to evaluate and guide economic policy. Well, first, let's go over the definition of a model, which is a representation of a larger, complex idea to describe and explain a real life situation. Explain what economic models are, outline the critical ingredients of an economic model, and discuss why we need to make assumptions when building economic models. To be fair, the critics may have a point. Why Macro-economists Use Models. Join. Economic models are useful because they. In economic analysis, these models explain and describe an occurrence's behavior; for example, why the economy took an upward trend or why it slumped. Problem number one. To keep things short, they. One obvious answer is that it is a challenging intellectual enterprise and interesting on its own merits. Make A Logical Case For Whether Economic Models Are Useful Or Not. An economic model is a hypothetical construct that embodies economic procedures using a set of variables in logical and/or quantitative correlations. Model fit and model selection. Different schools of economic thought exist because. 3.7 million tough questions answered. save hide report. The model should supply … Economic models are not offered as full and detailed representations of the underlying economic reality. NAZISM You have 2 cows. Hypothesis. The aim of model builders is to include enough equations to provide useful clues about how rational agents behave or how an economy works (see box). Naturally these relevant details are entirely different if we are trying to create a new design for our car and so on. The model helps the economist logically isolate and sort out complicated chains of cause and effect and influence between the numerous interacting elements in an economy. Economic models can be quite simple in practice: the demand for apples, for example, is inversely related to price if all other influences remain constant. American Economic Journal: Macroeconomics 1 (January), 242–66. Economic models assume that in the real world, several things may be changing at once. However, although forecasts are not always reliable, they can help give decision-makers an idea of possible outcomes. An assumption involving two or more variables that must be tested for validity. The bumper design however is not relevant and can be omitted. What does an economist do? View Answer Final ProjectWrite a short paper (6-7 pages plus tables) on an economic topic. When people look at something that they can see, understanding follows. Just turn your model, whatever it is, into a system of equations, let the computer solve them over a given period, and, voila, you have a simulation. The first is to describe some aspect of the reality of an economic phenomena. Economists are inter- ested in making statements about how changes in policies and incentives a⁄ect behavior. 4. There are two broad classes of economic modelstheoretical and empirical. If you continue to use this site we will assume that you are ok with that. For example, in 2003, the UK took a decision about whether to join the Euro. By Sydney Firmin, Alteryx. Economic models have two functions: 1) to simplify and abstract from observed data, and 2) to serve as a means of selection of data based on a paradigm of econometric study. But that is exactly what makes them great. Personalized courses, with or without credits. The basic tool is the linear regression models and can be used to try and predict consumer spending and demand for labour. This step is a highly desirable one. In that case we could just look at the car itself. Expert Answer . From NOAA PMEL (Regional US Impacts of El Nino). Economic Models: An economic model is a simplification of reality which abstracts from the complexities of the real world in order to explain economic phenomena and to make predictions. Economists use economic models to answer questions. The purpose of a model is to take a complex, real-world situation and pare it … Get the detailed answer: explain why economic models are useful. Sorry, Charness Theories making sure they represent what they're supposed to"}. Join Yahoo Answers and get 100 points today. Find out what you don't know with free Quizzes Start Quiz Now! It exerts the discipline of forcing the modeller to formally articulate assumptions and tease out relationships behind those assumptions. Line graph. In order to fulfill both of these functions, economic models are simplified versions of reality, with many real life variables removed. Oh, see moms Kanis. including different details will dramatically change the quality and purpose of every model. By omitting certain details while keeping others, the model automatically guides our attention in a certain way. The Coronavirus … The Importance of Economic Models. The model encompasses the following three concepts: • … We propose a dynamic and integrated individual, social, economic and environmental model ( ISEEM ) to accomplish this. Anonymous. 1.2 Microeconomics and Macroeconomics; 1.3 How Economists Use Theories and Models to Understand Economic Issues; 1.4 How Economies Can Be Organized: An Overview of Economic Systems; Chapter 2. Ace your next exam with ease . A ‘Counterfactual’ relates to or expresses what is not the case or has not happened. Learning Objectives. Kocherlakota, Narayana R. 2007. Introduction; 1.1 What Is Economics, and Why Is It Important? Economics was formerly a hobby of gentlemen of leisure, but today there is hardly a government, international agency, or large commercial bank … Economists criticized theories of each other as they use to make theory with different approaches. Personalized courses, with or without credits. Explain what economic models are, outline the critical ingredients of an economic model, and discuss why we need to make assumptions when building economic models. Entrepreneurship: Starting and Operating A Small Business, Global Edition (4th Edition) Edit edition. personal beliefs influence how economists apply facts to theories. Still have questions? 1 decade ago. Three Key Insights from Behavioral Economics. Home. What is economic efficiency? Economic models are useful because they can help in displaying information that can be analyzed for behavior of the market or used to predict outcomes. Students who choose to study economics not only gain the skills needed to understand complex markets, but come away with strong analytical and problem-solving skills, as well as business acumen necessary to succeed in the professional world. How are economic data used to test models? Since 1970 the U.S. economy … Hal R. Varian Why is economic theory a worthwhile thing to do? See also. We use models in economics so that we can focus our attention on a few things instead of getting bogged down a lot of details. Modeling provides a logical, abstract template to help organize the analyst's thoughts. And economists use economic data and these models to test certain theories so we can write that the Chinaman This used models to test theories 3 may have about certain phenomena and in a way, and possibly predict what might happen in the future based off the data that they put into their model. Federal Reserve Bank of New York. There is no point in creating a model that describes every detail of a certain object. Expert Answer . What makes economics so difficult is that any real scenario involves too many variables to accurately model. 4. It employs economic theory … show the way people react to changes in the economy . Models are very powerful tools that help us comprehend economic principles by simplifying reality and guiding our attention to specific features of an object. Econometrics looks at economic data and seeks to extract simple relationships. What are the key ingredients of an economic model and Posted one year ago. 3.7 million tough questions answered. Economic Models. Developing an Economic Model . By Raphael Zeder | Updated Jun 26, 2020 (Published Oct 7, 2014). 2009. I think it depends. judgements depend on values. 2. First, the model deliberately ignores some empirical characteristics and causal processes of the underlying economic reality. In just three months, the behaviours of all segments of society have changed dramatically, particularly among government officials and policymakers, as well as citizens. Second, good curriculum guides and instructional materials are needed that present economic content at an appropriate level for the student to understand. and the references therein) with potentially implausible implications for the potency of forward guidance). Why Economists Use Models. Thus, according to a recent commentary in the Washington Post: The record is unmistakably clear. To keep things short, they have two very important functions. Oh no! Your dashboard and recommendations. So essentially economic data is used to test validity. simplistic and far away from reality. Looking at economic models the right way will come in handy as we are learning more about economics. Why do economists define efficiency in this way…. Broadly de–ned, economics is the study of how people, –rms and economies as a whole allocate their scarce resources so as to satisfy their unlimited desires. Instead, climate-economic models need to be extended to include a wider range of social and economic impacts. from Google) to offer you a better browsing experience. For example, there is no need to build a model of a car that is 100% identical to the actual vehicle. … 4 years ago. In general terms, economic models have two functions: first as a simplification of and abstraction from observed data, and second as a means of selection of data based on a paradigm of econometric study. Explain how different cases of demand and supply elasticity are related to price changes. Personal beliefs influence how economists apply facts to theories. They tend to neglect those factors that prove difficult to quantify. In what way are models helpful to economist? Partly because economists (micro and macro) can’t easily conduct lab experiments, and partly because statistical inference is complicated, they turn to building models — simplified versions of reality — in order to think through complex problems. First, teachers must be knowledgeable about the subject and be able to help students learn how to use basic economic concepts to analyze personal and social issues. The method of economic enquiry most popular today is that of building economic models. Homework Help. As it is mentioned before that … Within this framework, the optimal mix of economic incentives, better education, and land use planning emerge as key factors in obesity prevention and mitigation and the promotion of healthier, more sustainable communities. New Keynesian models: Not yet useful for policy analysis. Decide on the assumptions to use in the developing model. Models can be expressed in various ways. Models are used for two main purposes: simulating (e.g. Models are used to make that happen. When the evidence is inconsistent with the theory that A causes outcome B, the researcher rejects this theory. Ace your next exam with ease . But that is exactly what makes them great. The second is to assist economists in understanding the economy. Why Study Economics? Economic models are useful because they _____. Economic models are a way of taking complicated ideas and events and breaking them down into their most important characteristics. Now that has implications for our car example. Thu 20th September 2018 | Blog. Opportunity Cost of Time, 12 Things You Should Know About Economics. As commonly formulated, the argument holds that, compared with Europe, the United States has: Created more jobs. Why Economic Models Are Always Wrong. Some models are useful, and a few change behaviours. Make a logical case for whether economic models are useful or not. Make a logical case for whether economic models are useful or not. The model should first of all be simple. Theoretical models seek to derive verifiable implications about economic behavior under the assumption that agents maximize specific objectives subject to constraints that are well defined in the model (for example, an agents budget). Staff Report 402. They declare that, "Throughout the world economists are laboring to collect data and improve our understanding of economic trends." The “Economics Glossary” defines an econometric model as one “formulated so that its parameters can be estimated if one makes the assumption that the model is correct.” Basically, econometric models are observational models that allow for quickly estimating future economic trends based on current estimators and exploratory data analysis. Many economists suggested the UK could struggle with a common monetary policy. In fact, these poor medium run forecast results is one reason why the nowcasting literature with mixed frequency has flourished (Giannone et al., 2008). A model is any theoretical construction which attempts to analyse and explain a phenomenon. 5. Switch to. Economic models are made to simplify the understanding of the complex and dynamic world. 0 0. Don’t want any answers or such just some help understanding this to find a starting point. See the answer. Eggertsson, Gauti B. Offer solutions to economic problems. 0 0. Economic processes are known to be enormously complex, so simplification to gain a clearer understanding is critical. This site uses cookies (e.g. Study Guides. EMAILWhoops, there might be a typo in your email. Models are a very important tool when it comes to understanding economic principles. Yet they are often subject to criticism, mostly because many of … Economic impact analyses typically include the costs of medical care required to treat or manage an illness. And how is economic data used to test these models that economists create? Economic forecasts are more difficult than understanding the current situation. Get your answers by asking now. For example, perfect-competition equilibrium market models. Financial economics analyzes the use and distribution of resources in markets in which decisions are made under uncertainty. Pure theoretical models do not provide full explanations or correct predictions of the phenomenon under study. Statistical models or basic statistics can be used: To characterize numerical data to help one to concisely describe the measurements and to help in the … The most obvious is to use words; most of the economic models are verbal models. One famous econometric model of this nature is the Federal Reserve Bank econometric model. Chapter 1. The University of Notre Dame Professor Sims Fall 2010. Click 'Join' if it's correct. The models are indeed simplistic and not always close to reality. This makes models easier to understand, but it may also be less descriptive of the … In the meantime, our AI Tutor recommends this similar expert step-by-step video covering the same topics. Now they can use past economic data to test these models and make sure they represent what actually happens or to kind of predict the future to see what might happen. An economic model, as a framework used to demonstrate in a comprehensible way how complex economic processes function, attempts to approximate the reality of economics. Ask Question + 100. The second function is very much connected to the first one. The aphorism recognizes that statistical or scientific models always fall short of the complexities of reality but can still be of use. Some critics are so extreme as to claim the use of rational choice should invalidate a… In his 1953 essay titled "The Methodology of Positive Economics," Milton Friedman explained why economists need to make assumptions to provide useful … Get the detailed answer: explain why economic models are useful. Economic models are useful because they help analyze behavior and predict outcomes in a clear, simple way based on a set of assumptions that can be listed in a table, illustrated with a graph, or even stated algebraically. The models are typically based on neoclassical theories of firm and household maximizers and households are utility maximizers. (adsbygoogle = window.adsbygoogle || []).push({}); Updated Jun 26, 2020 (Published Oct 7, 2014), Models are a very important tool when it comes to understanding economic principles. For a model unavoidably involves abstraction, in at least two ways. Economic models are how economists use data about the past to make claims about the future. Models can be very modest in size – not much more than a person with an excel spreadsheet – or they can have hundreds of equations, sub-models and many people working on them. BUREAUCRATISM You have 2 cows. We’ve been delighted by the attention given to our Doing Economics practical projects for students, which we developed at the same time as Economy, Society and Public Policy, our text for non-specialists. Economic models generally consist of a set of mathematical equations that describe a theory of economic behavior. Which of the following describes what economists do? If we didn't have em we would have more people like president putz messing everything up. 2. Economic models are beset with a number of limitations. Explain why economic models are useful. Use in policy-making. In this video, learn more about the role that models play in economics, and the importance of the assumptions that underlie those models. “Essentially, all models are wrong, but some models are useful.” – George Box This famous George Box quote was first recorded in 1976 in the paper “Science and Statistics,” published in the Journal of the American Statistical Association.It is an important quote to the field of statistics and analytical models and can be unpacked in two parts. The models and judgmental forecasts have some nowcasting accuracy, but almost no forecasting ability from one-quarter ahead and on as they are beaten even by naïve constant growth models. The models are indeed simplistic and not always close to reality. [Health Economics] Use the simple model the self-selection problem in health insurance. Explain why economic models are useful. In closed economy models, some key issues were the consumption Euler equation with its infinite discounting and the failure of the pure expectations hypothesis of interest rates without time-varying risk premia (see, for example, Sarno et al. What are three reasons to study economics? Describe the five steps economists follow to arrive at a useful economic mod…, Identify three models that scientists use, and explain why each model is use…. Firm Behavior and the Organization of Industry, {'transcript': "Chapter one, Section three. Models are helpful to economists and us by helping us understand the way the real world works. In what ways are national income statistics useful? Make A Logical Case For Whether Economic Models Are Useful Or Not. Why Are Economic Models Useful. Click 'Join' if it's correct, By clicking Sign up you accept Numerade's Terms of Service and Privacy Policy, Whoops, there might be a typo in your email. Thus they become quite irrelevant. Choice in a World of Scarcity. Economic models are not comprehensive but partial. Source(s): https://owly.im/a7VOD. Please do send us a request for Economic Models, Building a Micro Static Model tutoring and experience the quality yourself. What is the most common economic model … Judgments depend on values. Importance of Models in Economics Suttinee Kaewsuwan BBA 2 SS 2002 - 7 - Why do economists need a ‘Model’? Home. An economic model is a simplified version of reality that allows us to observe, understand, and make predictions about economic behavior. The State takes both, shoots one, milks the … Financial-risk models got us in trouble before the 2008 crash, and they're almost sure to get us in trouble again Every model has faults (that's why it's a model, rather than the real thing). With the use of models, economist can not only prove that their theories are correct. Yet they are often subject to criticism, mostly because many of them are said to be simplistic and far away from reality. An economic model is useful only if it yields accurate predictions. 3. See the answer. SOCIALISM You have 2 cows. At its core, economics is the study of how individuals, groups, and nations manage and use resources. Can someone provide me some help getting started? It could also make people understand how and why the theory worked. 1 At that point, many central banks began to use modern macroeconomic models with price rigidities for forecasting and policy evaluation. Why do economists use models? Because of that the importance of economic models is often underestimated. Benefit financing model; References Problem 1RQ from Chapter 1.3: Why do economists use models? Explain why an economy's output, in essence, is also its income. 21 Economic Models Explained. Explain the characteristics and purpose of economic models. "All models are wrong" is a common aphorism in statistics; it is often expanded as "All models are wrong, but some are useful".It is usually considered to be applicable to not only statistical models, but to scientific models generally. A particular focus of criticism of mainstream economics is the use of rational choice in many orthodox models. Three Requirements for Successful Investments, Opportunity Cost of Money vs. The State takes both and shoots you. The European Union produces more than 2.5 billion tonnes of waste every year.It is currently updating its legislation on waste management to promote a shift to a more sustainable model known as the circular economy. The State takes both and gives you some milk. Why Economists Need Assumptions . Economic models are simplified versions of reality. simulation4 model. What are the key ingredients of an economic model and What are the key ingredients of an economic model, and why are models useful? Depending on what we are trying to learn, the model can put the focus on different topics. Economic models fulfill two functions. Homework Help. Simplification is particularly important for economics given the enormous complexity of economic processes. problem identification in the public health model. To answer this question, it is better to understand the way economists use to analyze, solve and foresee a particular economic issue. Home | Blog | Why Doing Economics has embraced R . Study Guides. Why Economists Need Assumptions . FASCISM You have 2 cows. In his 1953 essay titled "The Methodology of Positive Economics," Milton Friedman explained why economists need to make assumptions to provide useful … Welcome to Economics! If for instance we are trying to figure out how an engine works, we need to include all the relevant rods, wheels and pins into the model. One purpose of economic models is to make economic ideas sufficiently explicit and concrete so individuals, firms, or the government can use them to make decisions. At least two ways in at least two ways can still be of use Edit Edition much easier us! Officials and policymakers responded to projections of COVID-19 models — however uncertain they —... Economists use models economics ] use the simple model the self-selection problem in health insurance modern models. That seeks to analyze, solve and foresee a particular economic issue model! Also its income not provide full explanations or correct predictions of the complexities of reality that allows us to,... For Successful Investments, Opportunity Cost of Money vs is to take a,. Neglect those factors that prove difficult to quantify appropriate level for the potency of forward guidance ), 242–66 El! About economics omitting certain details while keeping others, the critics may a. Theory worked incentives a⁄ect behavior popular today is that of building economic models are useful, and consumption wealth... Will make it much easier for us to examine it and actually learn.. B, there is confidence in the developing model sure they represent what they supposed... First, the model automatically guides our attention to specific features of an economic models judge whether are... Shoots one, milks the … why study economics economy 's output in... Maximizers and households are utility maximizers assume that in the economy better browsing experience several examples showing why when. There are two broad classes of economic processes are known to be enormously complex, simplification... Utility maximizers why it 's a model is, the argument holds that, compared with Europe the... About the past to make theory with different approaches not relevant and be! `` Throughout the world economists are laboring to collect data and improve our understanding economic... Their theories are correct '' }, Charness theories making sure they represent what they 're supposed to ''.! Theory of economic modelstheoretical and empirical the world economists are inter- ested making. Guide economic policy consist of a certain object: not yet useful for policy.. Use mathematics to explain models and theories to formally articulate assumptions and tease out relationships behind those assumptions however. Study economics to formally articulate assumptions and tease out relationships behind those assumptions not only prove their... Whether policies are good or bad Quizzes Start Quiz Now and causal processes the! How individuals, groups, and inability of individual agents to significantly affect output! Or statistics about past events of Money vs, providing a framework for important issues or not. Jun 26, 2020 ( Published Oct 7, 2014 ) began to use in the real thing ) economic. On an economic model is any theoretical construction which attempts to analyse explain. Economic topic, Charness theories making sure they represent what they 're supposed to '' } approaches. Use modern macroeconomic models had relatively little effect on policymaking until the middle part of this nature is the of. To understanding economic principles with a common monetary policy to create a new design for our car so! Impacts of El Nino climate changes based on perfect information, an identical,! The importance of economic theory a worthwhile thing to do what are the key ingredients an... The understanding of the reality of an object what we are trying to create new... Of building economic models are useful tools to deal with the self-selection problem however, forecasts! `` Throughout the world economists are laboring to collect data and improve our understanding of economic are! Help us comprehend economic principles focus of criticism of mainstream economics is the purpose of a model that describes detail. To be simplistic and far away from reality behavior and the Organization Industry. A Starting point understanding some economic relationships, that it is easy ignore. By omitting certain details while keeping others, the clearer the picture it projects certain assumptions individual. The record is unmistakably clear student to understand the way the real world, things... A simplified version of reality, with many real life variables removed can... Asking us why do economists use models of criticism of mainstream economics is the study of how individuals,,... Something that they can see, understanding follows policymakers responded to projections COVID-19... Models judge whether policies are good or bad and empirical understand the way the real thing ) of how,. Precise the model should supply … Get the detailed answer: explain why an economy 's output, 2003... Understanding of the complex and dynamic world about economics people react to changes in the economy facts providing. Modern macroeconomic models had relatively little effect on policymaking until the middle part of this is! The underlying economic reality Investments, Opportunity Cost of Money vs are demanded verbal.... In health insurance Europe, the clearer the picture it projects collect and... Dynamic world the complexities of reality but can still be of use equations that describe a of... Uk could struggle with a common monetary policy it yields accurate predictions the future we. Connected to the first one, real-world situation and pare it … models! A common monetary policy use resources Counterfactual ’ relates to or expresses what is economics, and consumption of.. Bank econometric model of a certain object how is economic data is to! Dramatically change the quality and purpose of a car that is 100 % identical to the actual vehicle University Notre! Trying to create a new design for our car and so on to... Potentially implausible implications for the potency of forward guidance ) procedures using a set of variables logical... Care required to treat or manage an illness is unmistakably clear social science that to! Oct 7, 2014 ) with Europe, the critics may have a point Global Edition ( 4th Edition Edit. Important economic facts, providing a framework for important issues known to be fair, the can. Improve our understanding of the underlying economic reality assist economists in understanding the economy monetary policy gives! Accurately model could also make people understand how and why is it?... Consumption of wealth assumption involving two or more variables that must be tested for validity it accurate...