circular flow diagram
a visual model of the economy that shows how dollars flow through markets among households and firms
production possibilities frontier
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
the study of how households and firms make decisions and how they interact in markets
the study of economy wide phenomena, including inflation, unemployment, and economic growth
The field of economics is divided into two subfields, what are they?
Microeconomics and Macroeconomics
What is the study decision of Microeconomists?
The study decision making by households and firms and the interaction among households and firms in the marketplace.
What is the study decision of Macroeconomists?
The study of the forces and trends that affect the economy as a whole
What is a normative statement?
A normative statement is an assertion about how the world ought to be. WHen economists make normative statements, they are acting more as policy advisers than as scientists.
Why when Economists advise policymakers it is conflicting advice?
Because of differences in scientific judgements or because of differences in values. Sometimes economists are united in the advice they offer but policymakers may choose to ignore it
How is economics like science?
Like all scientists, they make appropriate assumptions and build simplified models to understand the world around them.