Econ Final - Chapter 2

Front 1

Why do economists make assumptions?

Back 1

it makes the world simple and easier to understand.

Front 2

Steps of the Scientific Method?

Back 2

Ask a Question

Do Background Research

Construct a Hypothesis

Test Your Hypothesis by Doing an Experiment

Analyze Your Data and Draw a Conclusion

Communicate Your Results

Front 3

Experiments are difficult and sometimes impossible in economics. How do economists get around this?

Back 3

Natural experiments offered by historical examples.

Front 4

What are the two kinds of economic models we use?

Back 4

1. Circular Flow Diagram
2. Production Possibilities Frontier

Front 5

(Circular Flow Diagram)

Relationship between MARKETS FOR GOODS AND SERVICES and FIRMS

Back 5

MARKETS send revenue to FIRMS

FIRMS send goods to MARKETS

Front 6

(Circular Flow Diagram)

Relationship between HOUSEHOLDS and MARKETS FOR GOODS AND SERVICES

Back 6

HOUSEHOLDS buy goods/services from MARKETS FOR GOODS AND SERVICES

MARKETS FOR GOODS AND SERVICES get money from HOUSEHOLDS

Front 7

(Circular Flow Diagram)

Relationship between HOUSEHOLDS and MARKETS FOR FACTORS OF PRODUCTION

Back 7

HOUSEHOLDS give labor/land/capital to MARKETS FOR FACTORS OF PRODUCTION.

MARKETS FOR FACTORS OF PRODUCTION give income to HOUSEHOLDS.

Front 8

(Circular Flow Diagram)

Relationship between HOUSEHOLDS and MARKETS FOR FACTORS OF PRODUCTION and FIRMS

Back 8

MARKETS FOR FACTORS OF PRODUCTION give factors of production to FIRMS

FIRMS give wages/rent/profit to HOUSEHOLDS and MARKETS FOR FACTORS OF PRODUCTION

Front 9

In a Circular Flow model, what is the outside flow line?

Back 9

Dollars

Front 10

In a Circular Flow model, what is the inside flow line?

Back 10

inputs and outputs

Front 11

What is a Circular Flow Diagram?

Back 11

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

Front 12

In Circular Flow Diagrams, what do FIRMS do?

Back 12

Produce/Sell goods
Hire and use factors of production

Front 13

In Circular Flow Diagrams, what do HOUSEHOLDS do?

Back 13

Buy and consumer goods
Own and sell factors of production

Front 14

What is the Production Possibilites Frontier?

Back 14

A graph showing the combinations of ouput that the economy can produce givien available factors of production (between two things)

Front 15

Points inside the curve of the Production possibilites frontier are ___

Back 15

inefficient

Front 16

Points outside the PPF curve are ____

Back 16

impossible (not enough resources/tech)

Front 17

Points along the curve of the PPF are ___

Back 17

effecient and offer production possibilityes with tradeoffs

Front 18

What [ 4 ] concepts are illustrated by the Production Possibilities Frontier?

Back 18

Efficiency
Tradeoffs
Opportunity cost
Economic growth

Front 19

What can cause shifts in PPF?

Back 19

If for some reason, it becomes easier to produce more of either product.

Front 20

What do microeconomics focus on?

Back 20

individual parts of the economy

HOUSEHOLDS and FIRMS decisions' and interactions in specific markets.

Front 21

What do macroeconomics focus on?

Back 21

the economy as a whole

Economy-wide phenomena, like inflation/unemployment/economic growth.

Front 22

Inflation would be measured by which kind of economics?

Back 22

Macroeconomics

Front 23

How households and firms make decisions - would be measured by which kind of economics?

Back 23

Microeconomics

Front 24

What things are looked at by macroeconomics?

Back 24

Inflation

Unemployment

Growth

Front 25

When are economists scientists?

Back 25

when they try to describe the world.

Front 26

When are economists policy advisors?

Back 26

When they try to change the world.

Front 27

What are positive statements?

Back 27

statements that attempt to describe the world as it is.

Front 28

Positive statements are what kind of analysis?

Back 28

descriptive analysis.

Front 29

What are normative statements?

Back 29

statements about how the world should be.

Front 30

Normative statements are what kind of analysis?

Back 30

Prescriptive analysis

Front 31

Unemployment is higher for who?

Teens / Olds

Back 31

Teenagers.

Front 32

What's a key difference between normative and positive statements?

Back 32

We can confirm or refute positive statements by looking at evidence.

Front 33

Why do Economists Disagree?

Back 33

1. Difference in scientific judgements and the validity of positive theories
2. Difference in values