1. Lectures in Macroeconomics- Charles W. Upton The Role of Models

2. The Test of a Model We never know whether models are true or false.

3. The Role of Models The Test of a Model We never know whether models are true or false. Some models fit the facts better than others.

4. The Role of Models The Test of a Model We never know whether models are true or false. Some models fit the facts better than others. But what about a simple model that “pretty much fits the facts”?

5. The Role of Models Simple vs. Complicated Models The economic models we use in this course are necessarily simple. But sometimes a simple model is quite useful.

6. The Role of Models Two Examples Is the world flat or round?

7. The Role of Models Two Examples Is the world flat or round? –Driving around Ohio –Flying to Asia

8. The Role of Models Two Examples Is the world flat or round? –Driving around Ohio –Flying to Asia How to drive to San Francisco

9. The Role of Models Two Examples Is the world flat or round? –Driving around Ohio –Flying to Asia How to drive to San Francisco –Take I-80 –We miss details, but we better have the general model in mind.

10. The Role of Models In Summary Models can be powerful and useful The ultimate test is “does it fit the facts”.

11. The Role of Models End ©2003 Charles W. Upton. All rights reserved