Econometric model
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Econometric models are used by economists to find standard relationships among aspects of the macroeconomy and use those relationships to predict the effects of certain events (like government policies) on inflation, unemployment, growth, etc... Econometric models generally have a short-run aggregate supply component with fixed prices, and aggregate demand portion, and a potential output component. As an example in the not-too-recent past, the 2000 presidential candidate George W. Bush wanted to know how his planned tax cut would affect the economy. Economists entered the tax into their model and came up with an estimate of the effect. Two famous econometric models are the Federal Reserve Bank econometric model and the DRI-WEFA model.
See also
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