Economic Modeling
The use of financial models to evaluate the impact of different strategic choices on shareholder value and corporate performance.
Implications
The creation of abstract representations or simulations of economic processes and systems to analyze the impact of different variables, policies, or decisions, often used in forecasting, policy analysis, and strategic planning to predict outcomes and inform decisions.
Example
Example: A government uses economic modeling to predict the impact of a proposed tax policy on consumer spending and overall economic growth, guiding legislative decisions.
Related Terms
Different from financial modeling, which typically focuses on a company's financial statements, economic modeling can apply to entire economies, industries, or markets, and includes broader variables like interest rates, inflation, and trade policies.
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