Chapter 2

Question 0

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

Answer 0

Production Possibilities frontier

Question 1

Visual model of the economy that shows how dollars flow through markets among households and firms

Answer 1

Circular-flow diagram

Question 2

The study of how households and firms make decisions and how they interact in markets

Answer 2

Microeconomics

Question 3

The study of economy-wide phenomena, including inflation, unemployment, and economic growth

Answer 3

Macroeconomics

Question 4

Claims that attempt to describe the world as it is

Answer 4

Positive statements

Question 5

Claims that attempt to prescribe how the world should be

Answer 5

Normative statements

Question 6

What are the two markets?

Answer 6

Goods and services and Factors of production

Question 7

Households are buyers, firms are sellers

Answer 7

Market for Goods and Services

Question 8

Households are sellers, firms are buyers

Answer 8

Markets for Factors of Production