Chapter 1

Question 1

Good VS. Bad Economics

Answer 1

Good:
- Uses both Micro and Macroeconomics.
- Looks at wages.
- Does not judge and knows how things are.
- Looks at the long run and possible outcomes.

Bad
- Only uses microeconomics.
- Looks at big picture.
- Greed, Capitalism, Judges.
- Looks at short run and immediate outcome.

Question 2

What is Economics

Answer 2

The study of how society manages its
scarce resources.

Question 3

How People Make Decisions (10 Principles of Economics) (Look at Notes)

Answer 3

1. Trade-offs Are Everywhere (Example Drug Testing).
2. Opportunity Cost - To get one thing, we usually have to give up another thing aka Opportunity Cost.
3. People Think at the Margin - People make decisions by comparing costs and benefits at the margin as if they are rational.
4. People Respond to Incentives.
5. Trade Makes People Better Off.
6. Wealth and Economic Growth are Important.
7. Institutions Matter (Rules of the game).
8. Economic Boom’s and Bust’s cannot be Avoided but can be Moderated.
9. Inflation is Caused by an Increase in the Supply of Money.
10. Central Banking is a Hard Job (Federal Reserve).