Chapter 2: Thinking Like An Economist

Question 1

Circular flow diagram

Answer 1

A visual model of the economy that shows how dollars flow through markets among households and firms

Question 2

Production possibility frontier

Answer 2

Graph that shows the combinations of output that the economy can possibly produce given the available factors of production and available technology

Question 3

Positive statements

Answer 3

What is

Question 4

Normative statements

Answer 4

What ought to be

Question 5

Scientific model steps

Answer 5

Observation, theory, and more observation

Question 6

Economic models are usually ______ and _______ all built on ______

Answer 6

Diagrams + equations

Assumptions

Question 7

Circular flow diagram

Answer 7

A visual model of the economy that shows how dollars flow through markets along households and firms

Question 8

4 main sections in the circular flow diagram

Answer 8

1) Markets for goods / services
2) households
3) markets for factors of production
4) Firms

Question 9

Production possibilities frontier

Answer 9

Graph that shows the combinations of outputs that the economy can possibly produce given the available factors of production and technology

Question 10

Positive analysis is concerned with ________

Answer 10

What is

Question 11

Normative analysis is concerned with __________

Answer 11

What ought to be

“Should” “needed”

Question 12

Curved vs straight PPF

Answer 12

The curved one is used when tech increases showing more production of that item

Or less labour = less output, decrease the ppf curve

Question 13

Microeconomics

Answer 13

Households and firms interact to make decisions

Question 14

Macroeconomics

Answer 14

Economy wide phenomena which includes inflation, unemployment, and economic growth

Question 15

Economists disagree for 2 basic reasons, the _____ of alternative theories, and they have different ______ and ________

Answer 15

Validity

Values and viewpoints