<P> In addition to their professional academic interest, the use of models include: </P> <Ul> <Li> Forecasting economic activity in a way in which conclusions are logically related to assumptions; </Li> <Li> Proposing economic policy to modify future economic activity; </Li> <Li> Presenting reasoned arguments to politically justify economic policy at the national level, to explain and influence company strategy at the level of the firm, or to provide intelligent advice for household economic decisions at the level of households . </Li> <Li> Planning and allocation, in the case of centrally planned economies, and on a smaller scale in logistics and management of businesses . </Li> <Li> In finance predictive models have been used since the 1980s for trading (investment, and speculation), for example emerging market bonds were often traded based on economic models predicting the growth of the developing nation issuing them . Since the 1990s many long - term risk management models have incorporated economic relationships between simulated variables in an attempt to detect high - exposure future scenarios (often through a Monte Carlo method). </Li> </Ul> <Li> Forecasting economic activity in a way in which conclusions are logically related to assumptions; </Li> <Li> Proposing economic policy to modify future economic activity; </Li>

The first step in creating an economic model is to