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Macroecon Chapter 2 Notes

by: Reyana Brown

Macroecon Chapter 2 Notes ECON 2133

Marketplace > East Carolina University > Economcs > ECON 2133 > Macroecon Chapter 2 Notes
Reyana Brown
GPA 3.3

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About this Document

These notes cover topics in chapter 2
Nehad Elsawaf
Class Notes
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This 2 page Class Notes was uploaded by Reyana Brown on Saturday February 6, 2016. The Class Notes belongs to ECON 2133 at East Carolina University taught by Nehad Elsawaf in Spring 2016. Since its upload, it has received 23 views. For similar materials see Macroeconomics in Economcs at East Carolina University.


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Date Created: 02/06/16
Macro-Economics Chapter 2 Topics Covered: • An economist’s role • Normative and positive statements • Models that economists use Review Question: What is the difference and relation between Microeconomics and Macroeconomics? • Microeconomics focuses on the study of smaller decisions made in a specific market while Macroeconomics focuses on economy wide issues. They are related because without thinking about the decisions from a macroeconomist standpoint you couldn’t answer the macroeconomist’s questions NOTES: • Economists play the role of a scientist and policy advisor • As a scientist, economists approach problems by using the scientific method (observing and coming up with theories on how the world and the economies work) • As a policy advisor, economists propose ideas on the world should work • Positive Statements: statements that economists make saying how the world is (scientist approach) • Normative Statements: statements that economists make saying how the world should operate (policy advisor approach) Why Economists Disagree • Difference in Values: the economists have different opinions on judgments • Difference in Scientific Judgments: how the economists differ in observations and theories that they made • With assumptions, economists can simplify complex problems which makes it easier to understand and approach • Model: a more simple way to present a complicated idea • Examples • Circular-Flow Diagram: a model of the money flow in the economy. This diagram only represents firms and households. The markets in this diagram is goods and services and factors of production. • Market for goods and services -> Buyers are the households and sellers are the firms • Market for factors and productions -> Buyers are the firms and sellers are the households • What is Factors of production? • the resources used for goods and services Production Possibilities Frontier (PPF): a visual representation of all the • combinations possible to produce goods given the resources available • How to read a PPF? • Points on the line in the graph are goods that are possible to make and are efficient Points under the line on the graph are possible to make but are not made efficiently • • Points above the line on the graph are not possible to make • Remember that slope is rise over run • With a PPF the graph can have a consistent slope (straight line) or it can be bow shaped which means that when more is produced the price rises Straight Line: Bow Shaped:


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