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13 Cards in this Set
- Front
- Back
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Model
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a simplified representation of a real situation that is used to better understand real-life situations
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Other things equal assumption
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all other relevant factors remain unchanged
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Production possibility frontier
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the trade-offs facing an economy that produces only two good. It shows the max quantity of one good that can be produced for any given quantity produced of the other
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Factors of production
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Resources used to produce goods and services
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Technology
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the technical means for producing goods and services
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Comparative Advantage
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producing a good or service if its opportunity cost of producing the good or service is lower than other countries
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Absolute Advantage
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producing a good or service if the country can produce more output per worker than other countries.
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Barter
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when people directly exchange goods or services that they have for good or services that they want
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Circular-flow diagram
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represents the transactions in an economy by flows around a circle
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Income distribution
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the way in which total income is divided among the owners of the various factors of production
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Positive economics
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the branch of economic analysis that describes the way the economy actually works
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Normative economics
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makes prescriptions about the way the economy should work
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Forecast
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is a simple prediction of the future
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