Chapter 2 - Thinking Like An Economist

Vocabulary
Circular-Flow Diagram


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


 * What It Means:

Production Possibilities Frontier


 * Definition: 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.


 * What It Means:

Microeconomics


 * Definition: The study of how households and firms make decisions and how they interact in markets.


 * What It Means:

Macroeconomics


 * Definition: The study of economy-wide phenomena, including inflation, unemployment, and economic growth.


 * What It Means:

Positive Statements


 * Definition: Claims that attempt to describe the world as it is.


 * What It Means:

Normative Statements


 * Definition: Claims that attempt to prescribe how the world should be.


 * What It Means: