Question

is it important to build completely realistic economic models? explain why

Answer 1

Solution

Economic models are built based on some real life situations, they help economists to understand and provide a solution or phenomenon behind a problem. Economists also use these models to predict the future values of macroeconomic variables which can affect economy's current situation. If these models aren't realistic then they can not be trusted as the value or conclusions provided them will not be reliable. Economists try to built these models as realistic as possible and which can make them very complicated, thus economists try to manipulate them and try to fit them in easy position. These models are built on real situation but sometimes results provided by them may not accurate as a lot of other unknown factors outside the affect the final outcome. In order to make use of these economic models for which they are being built, they should be realistic otherwise they will not remain useful for the economy.