Econ Ch 2

Front 1

Circular-Flow Diagram

Back 1

Visual model of the economy that shows how dollars flow through markets among households and firms.

Front 2

Factors of Production

Back 2

Labor, land, and capital firms use to produce goods and services.

Front 3

Markets for Goods and Services

Back 3

Households buy output of goods and services and firms sell the goods and services.

Front 4

Markets for the Factors of Production

Back 4

Households sell inputs that firms use to produce goods and services.

Front 5

Production Possibilities Frontier

Back 5

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

Front 6

Efficient Outcome

Back 6

The economy is getting all it can from the scarce resources available.

Front 7

Inefficient Outcome

Back 7

The economy is producing less that it could from resources it has available.

Front 8

Microeconomics

Back 8

Study of how households and firms make decisions and how they interact in markets.

Front 9

Macroeconomics

Back 9

Study of economywide phenomena, including inflation, unemployment, and economic growth.

Front 10

Positive Statements

Back 10

Claims that attempt to describe the world as it is.

Front 11

Normative Statements

Back 11

Claims that attempt to prescribe how the world should be.

Front 12

Economic Report of the President

Back 12

Discusses recent developments in the economy and presents the council's analysis of current policy issues.

Front 13

Graphs serve 2 purposes

Back 13

1. Graphs offer a way to visually express ideas that are confusing or less clear in writing.
2. Graphs provide a way of seeing and interpreting patterns.

Front 14

Graphs for single variables

Back 14

Pie chart, bar graph, and time-series graph

Front 15

The Coordinate System

Back 15

Allows you to display two variables on a single graph

Front 16

Positive Correlation

Back 16

When two variables move up or down in the same direction

Front 17

Negative Correlation

Back 17

When two variables move in opposite directions

Front 18

Demand Curve

Back 18

Traces out the effect of a good's price on the quantity of the good consumers want to buy

Front 19

When is it necessary to shift a curve?

Back 19

When a variable that is not named on either axis changes, the curve shifts

Front 20

Slope

Back 20

slope=change in y/change in x

Front 21

Omitted Variable

Back 21

a variable that is not pictured on the graph that changes one of the pictured variables

Front 22

Reverse Causality

Back 22

misreading the direction of cause and effect of two variables