Economic modeling is at the heart of economic theory. Modeling provides a logical,
abstract template to help organize the analyst's thoughts. [ 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. Through the use of a model, the economist can experiment,
at least logically,
producing different scenarios, attempting to evaluate the effect of alternative
policy options, or weighing the logical integrity of arguments presented in prose.
Certain types of models are extremely useful for presenting visually the essence of
economic arguments. No student of economics has sat through a class for very long before a
picture is drawn on a chalkboard. The visual appeal of a model clarifies the exposition.
In this text, four primary models will be presented; the Aggregate Supply - Aggregate
Demand (AS/AD) Model, the Loanable Funds Model, an HMCMacroSim simulation model,
and the IS/LM Model. All but the Loanable Funds model are inclusive models of the national
economy. The Loanable Funds Model is a model of the finance markets and is used to discuss
interest rate determination theory. ]
There are no new answers.