Chapter 2: Thinking like an Economist

Question 1

a simple representation of something complex is known as

Answer 1

Economic Model

Question 2

On a circular flow diagram of the economy the outer loop represent the ________ the inner loop represent ________________

Answer 2

flow of money;inputs

Question 3

Speaking in terms of goods and services, firms and businesses..

Answer 3

sell goods and services (households by them)

Question 4

Speaking in terms of goods and services, households…

Answer 4

spend money on goods an services (firms make revenue)

Question 5

Speaking in terms of factors of production, firms and businesses..

Answer 5

need input/factors of production (labor and workers) to run the business, use their revenue to pay the households (workers) through wages

Question 6

speaking in terms of factors of production, households…

Answer 6

offer their labor services to firms to receive income

Question 7

as a firm, what is left after paying wages, rent and other inputs

Answer 7

profit

Question 8

Production Possibilities Frontier

Answer 8

is a curve depicting the different combinations of goods and services an economy can produce efficiently in a period given

Question 9

a PPF shows

Answer 9

how much a nation can produce

Question 10

a PPF is always

Answer 10

downward sloping

Question 11

points on the PPF are

Answer 11

attainable, efficient

Question 12

points inside the ppf are

Answer 12

attainable, inefficient

Question 13

points outside the ppf are

Answer 13

unattainable

Question 14

inefficient outcomes on the PPF are due to

Answer 14

production inefficiency

Question 15

production inefficiency is when

Answer 15

the economy does not use resources efficiently in production

Question 16

attainable means

Answer 16

the economy has enough resources to produce it

Question 17

unattainable means

Answer 17

the economy doesn’t have enough resources produce it

Question 18

in a demand curve when the quantity demanded and the price move in the same direction they are…

Answer 18

positively related, upward sloping curve

Question 19

in a demand curve when the quantity demanded and the price move in opposite directions they are..

Answer 19

negatively related, downward sloping

Question 20

the most an economy can produce

Answer 20

efficient outcome

Question 21

economist like to make assumptions as they can _______ a ______ meaning, making it easier to understand

Answer 21

simplify;complex

Question 22

a visual model of the economy is a

Answer 22

circular flow diagram

Question 23

The PPF shows the trade off between

Answer 23

the outputs of different goods at a given time

Question 24

the study of how households and firms make decisions and how they interact in specific markets

Answer 24

microeconomics

Question 25

the study of economy-wide phenomena including inflation, unemployment, and economic growtch

Answer 25

macroeconomics

Question 26

Positive Statements are

Answer 26

descriptive, they make a claim about how the world is, can be confirmed through evidence, can be a persons set beliefs

Question 27

Normative Statements are..

Answer 27

prescriptive, they make a claim about how the world ought to be, cannot be judged using data

Question 28

when income increases the demand curve shifts to the

Answer 28

right

Question 29

a small slope(a number close 0) means the demand curve is relatively

Answer 29

flat

Question 30

a large slope (a number farther from zero) means the demand curve is relatively

Answer 30

steep