Econ Ch 2

Front 1

circular flow diagram

Back 1

a model that explains how the economy is organized and how participants in the economy interact with one another, simply organizes all the economic transactions that occur between households and firms in the economy

Front 2

firm

Back 2

produce goods and services using inputs, such as labor, land, and capital (buildings and machines).

Front 3

factors of production

Back 3

inputs: labor, land, capital (buildings and machines)

Front 4

households

Back 4

own the factors of production and consume all the goods and services that the firms produce

Front 5

market for goods and services

Back 5

households are buyers and firms are sellers. Households buy the output of goods and services that firms produce

Front 6

markets for the factors of production

Back 6

households are sellers and firms are buyers. Households provide the inputs that firms use to produce goods and services

Front 7

production possibilities frontier

Back 7

graph that shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology that firms can use to turn these factors into output

Front 8

microeconomics

Back 8

the study of how households and firms make decisions and how they interact in specific markets (ie effects of rent control on housing in NYC, impact of foreign competition on the US auto industry, effects of compulsory school attendance on workers' earnings)

Front 9

macroeconomics

Back 9

study of economy-wide phenomana (ie effects of borrowing by the federal gov't, changes over time in the economy's rate of unemployment, alternative policies to raise growth in national living standards)

Front 10

positive statements

Back 10

descriptive-make a claim about how the world IS

Front 11

normative statements

Back 11

prescriptive-make a claim about how the world OUGHT TO BE