What is the role of models in economic analysis: How can it be determined if the assumptions underlying the design of an economic model are overly simplified or overly limiting?

What is the role of models in economic analysis?

Question 1

What is the role of models in economic analysis? How can it be determined if the assumptions underlying the design of an economic model are overly simplified or overly limiting? At what point do the assumptions invalidate the model? Why?

Question 2

The high rates of unemployment and business bankruptcies during the Great Depression of the 1930’s caused a dramatic increase in government intervention in the economy of the United States. What was the original intent of this government intervention? What were the most significant microeconomic and macroeconomic effects of this government intervention? Why?

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