Chapter 2 - Thinking Like an Economist

Question 0

Production Possibilities Frontier

Answer 0

A production possibilities frontier is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology.

Question 1

Circular-Flow Diagram

Answer 1

A circular-flow diagram is a visual model of the economy that shows how dollars flow through markets among households and firms.

Question 2

Microeconomics

Answer 2

Microeconomics is the study of how households and firms make decisions and how they interact in markets.

Question 3

Macroeconomics

Answer 3

Macroeconomics is the study of economy wide phenomena, including inflation, unemployment, and economic growth.

Question 4

Positive Statements

Answer 4

Positive statements are claims that attempt to describe the world as it is.

Question 5

Normative Statements

Answer 5

Normative statements are claims that attempt to prescribe how the world should be.