What makes a good economic model?

Question

What makes a good economic model?

Answer 1

Whether a population can sustain itself and support its young and old and infirm in a humane way; this is an economy in equilibrium. When economies go south these groups suffer first. Poor education, harsh treatment of the old and infirm are a sure sign an economy is on the rocks.

Modern economies have an optimized level of inflation (supposedly the ideal is 2% per annum) which insures interest in investing.

Once again, when an economy gets out of whack, a higher rate of inflation sets in, people cannot buy needed goods and services and the general population suffers... or conversely, if the economy loses jobs above a certain rate, more and more people cannot support themselves. Businesses are forced to lower prices, or forced to change their hiring practices.

The US is currently undergoing a stagnant economy with an unacceptable inflation rate and moderate to severe joblessness. The joblessness is particularly evident among the old. One would almost think they were being killed off to relieve the government of its social security obligation. Yes, one might think that is what is going on.

Answer 2

A good economic model is the one which has equilibrium. Also, a good economic model is the one you can predict where the equilibrium will be after the effects of changing one variable. Last, but not least, a good economic model is the one you could blame if your predictions went all wrong.

I hope this helps

Answer 3

A cartesian coordinate graph, which shifts to the left and to the right a lot, and also moves up and down the lines that are shifted.