Unit 2 (Thinking Like an Economist) Flashcards

1
Q

What is the scientific method?

A

Addressing subjects using objectivity

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2
Q

Why do economists make assumption?

A

Assumptions simplify the complex world

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3
Q

Should an economic model describe reality exactly?

A

No, the realistic world is too complex to put into one model

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4
Q

What is the factor market?

A

where businesses invest in resources

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5
Q

What is the product market

A

where goods and services are sold

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6
Q

What is one economic interaction that is not covered by the circular flow diagram?

A

international trade

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7
Q

What happens if a point is outside the PPF

A

this is not possible (without trade)

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8
Q

What is happening when a point is on the PPF

A

The country is using all resources efficiently

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9
Q

What is happening when a point is below the PPF

A

Not enough resources are being used

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10
Q

Define macroeconomics

A

The study of economywide phenomena, including inflation, unemployment, and economic growth

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11
Q

Define microeconomics

A

The study of how households and firms make decisions and how they interact with the market

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12
Q

What is a positive statement?

A

They make claims on how the world is right now

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13
Q

What is a normative statement?

A

They make claims on how the world should be

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14
Q

Why should a country invest in capital goods instead of consumption goods for their future?

A

Capital goods in the long run will help produce more consumption goods in the future

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15
Q

What are factors of production?

A

Land, labor and capital

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16
Q

How does a reduction in unemployment shift a countries PPF

A

it does not

17
Q

How is economic growth shown on the PPF

A

It shifts outward

18
Q

Why might economists disagree?

A

If they have different values

19
Q

What is reverse causality?

A

a phenomenon that describes the association of two variables differently than you would expect