Which of the following helps measure the quality of a good economic model?

• A. Its alignment with normative values
• B. The number of assumptions it makes
• C. Its ability to accurately predict real-world outcomes
• D. The complexity of its mathematical equations

Answer: (C)

Verified step by step guidance

1. Understand that an economic model is a simplified representation of reality used to explain and predict economic phenomena.
2. Recognize that the quality of an economic model is primarily judged by how well it performs in practice, especially its predictive power.
3. Evaluate the options given: alignment with normative values relates to what ought to be, not how well the model predicts; the number of assumptions is about simplicity but not necessarily quality; complexity of equations does not guarantee accuracy.
4. Focus on the model's ability to accurately predict real-world outcomes, as this reflects its empirical validity and usefulness.
5. Conclude that the best measure of a good economic model is its predictive accuracy, which allows economists to test and refine theories based on observed data.