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21 Cards in this Set
- Front
- Back
What do economists use as a substitute for a laboratory when applying the scientific method.
Give an example. |
Natural experiments offered by history.
An example is the war in the middle east which interrupted the flow of crude oil, causing oil prices to skyrocket around the world. |
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What is the Circular-Flow diagram?
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The circular flow diagram is a visual model of the economy. It includes only two types of decision-makers: households and firms.
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In the Circular-flow diagram, what role do firms play?
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Firms produce and sell goods and services. Firms hire and use factors of production.
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In the circular-flow diagram, what role do households play?
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Households buy and consume goods and services. Households own and sell factors of production.
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In the circular-flow diagram, what are factors of production?
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Factors of production include labor, land and capitol ( buildings and machines ).
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In the circular flow diagram, what are the two markets in which households and firms interact?
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The market for goods and services and the market for factors of production.
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What does the inner loop of the circular flow diagram represent?
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The flow of inputs and outputs. Inputs and outputs are the use of factors of production and goods and services.
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What does the outer loop of the circular flow diagram represent?
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The flow of dollars
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In the circular flow diagram, in what form do dollars flow from firms to households?
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Dollars flow from firms to households as income ( wages ), rent ( use of land & capital ), and profit ( paid to owners of firms who are members of households ).
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What is the production possibilities frontier?
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The production possibilities frontier is a graph that shows various combinations of output that the economy can produce given the constraints of raw material and production technology.
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What is an efficient outcome?
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An efficient outcome is one in which the economy is getting all it can from the scarce resources it has available.
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In the production possibilities frontier, what characterizes an efficient outcome?
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An efficient outcome is represented by a point that lies on the production possibilities frontier ( rather than inside the frontier ).
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In the production possibilities frontier, what characterizes an inefficient outcome?
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An inefficient outcome is represented by a point that lies inside the production possibilities frontier.
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What is microeconomics?
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Microeconomics is the study of how households and firms make decisions and how they interact in specific markets.
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What is macroeconomics?
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Macroeconomics is the study of economy wide phenonoma.
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How is "positive analysis" different from "normative analysis" ?
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Positive analysis consists of descriptive statements that say how the world is. Normative analysis consists of prescriptive statements that tell how the world ought to be.
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In addition to facts, what is needed to evaluate normative statements?
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Evaluating normative statements involves values as well as facts.
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What is the Council of Economic Advisers?
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The Council of Economic Advisers consists of three members and a staff of several dozen economists. Its only duties are to advise the president and to write the annual "Economic Report of the President"
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What do economists at the Department of the Treasury do?
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Economists at the Department of the Treasury help design tax policy.
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What do economists at the Department of Labor do?
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Economists at the Department of Labor analyze data on workers and those looking for work in order to help formulate labor-market policies.
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What do economists at the Department of Justice do?
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Economists at the Department of Justice help enforce the nation's antitrust laws.
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