Which practice involves constructing complex models of the economy using mathematical methods?

The practice of constructing complex models of the economy using mathematical methods is accurately described as economic modeling. Economic modeling involves the development of abstract representations or frameworks that outline how economic processes and relationships function, which often includes various mathematical equations and relationships to analyze economic behavior and forecast future economic activity.

Economic models are essential tools for understanding the intricacies of the economy; they can simulate the effects of different policies, predict macroeconomic trends, and help in decision-making processes for budgeting and financial planning. This approach allows policymakers and finance officers to visualize potential outcomes based on various scenarios, making it a vital and analytical practice within public finance.

Judgmental forecasting relies more on subjective judgment and expertise rather than rigorous mathematical methods. Regression analysis, while a mathematical technique, is primarily focused on establishing the relationships between variables rather than constructing comprehensive economic models. Historical trend analysis looks at past performance to predict future behavior rather than creating complex frameworks to explore various economic interactions.