Chapter 2 - Observing and Explaining the Economy Flashcards
The 3 steps to explain economic trends
1 - Find good data to explain the trend or event
2- Identify the factors that may have caused the trend
3- Assess how changes elsewhere in the economy could affect the explanation.
Economic variable
Any economic measure that can vary over a range of values.
Two variables are said to be ____________ if they tend to move up or down together
correlated
A _________ correlation exists if two economic variables move in the same direction – when one goes up, the other goes up.
positive
A _________ exists if two economic variables move in opposite directions – when one goes up, the other goes down.
negative
Investigators perform _________ to determine whether one event causes another.
controlled experiment
Experimental economics
A branch of economics that uses laboratory experiments to analyze economic behavior.
Economic model
An explanation of how the economy or part of the economy works, (always an abstraction or simplification of the real world.)
Microeconomics
The branch of economics that examines individual decision making at firms and households and the way they interact in specific industries and markets.
Ex: the price of college
Macroeconomics
The branch of economics that examines the workings and problems of the economy as a whole – GDP growth and employment.
_______ is the total value of all goods and services made in the country during a specific period of time, (such as a year)
Gross Domestic Product (GDP)
To use models for prediction, economists use the assumption _______________ which means “all other things being equal”
ceteris paribus
Capitalism
A market economy in which capital is individually owned and production and employment decisions decentralized
Socialism
An economic system in which the government owns and controls all the capital and makes decisions about price and quantities as part of a central plan.
Mixed economy
A market economy in which the government plays a large role
