Chapter 2

Question 1

Prices cannot be changed quickly so __

Answer 1

Is reasonable for economists to assume that prices are fixed in the short run and flexible in the long run.

Question 2

Assumptions _________ the world

Answer 2

Simplify

Question 3

2 Economic Models

Answer 3

-Circular Flow Diagram
-Production Possibilities Frontier

Question 4

Economic Models are made off ____________

Answer 4

Assumptions

Question 5

Circular flow diagram

Answer 5

Show the flow of the goods and services, factors of production, and monetary payments

Question 6

Market of Goods and Services

Answer 6

Households give money to firms
Firms give goods and services to households

Question 7

Market for Factors of Production

Answer 7

Firms give money to households
Households give work to firms

Question 8

Production Possibilities Frontier

Answer 8

Shows the combinations of outputs an economy can posisbly produce with the available factors of production.

Question 9

A Production Possibilities Frontier is bowed outward because

Answer 9

The opportunity cost of producing mor of a good increases a near maximum

Question 10

A technological advance shoots the frontier____

Answer 10

Outward

Question 11

Microeconomics

Answer 11

Study of how households and firms make decisions and how they interact in specifc markets.

Question 12

Macroeconomics

Answer 12

Study of economy-wide phenomena such as the federal deficit, the rate of unemppoyment and policies to improvve our standard of living.

Question 13

Positive statement

Answer 13

Describe the world as it is. Can be confirmed or refuted with evidence. Descriptive

Question 14

Normative Statement

Answer 14

Describe how the world ought to be. Involves values and facts. Prescriptive