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Ch. 2 Macroeconomics

by: Hannah Shaffer

Ch. 2 Macroeconomics ECON 2105

Hannah Shaffer

GPA 3.76

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About this Document

These are Chapter 2 notes. Thinking like an economist.
Prin of Macroeconomics
Mark Partridge
Class Notes
25 ?




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This 3 page Class Notes was uploaded by Hannah Shaffer on Tuesday August 23, 2016. The Class Notes belongs to ECON 2105 at Georgia Gwinnett College taught by Mark Partridge in Fall 2016. Since its upload, it has received 7 views. For similar materials see Prin of Macroeconomics in Macro Economics at Georgia Gwinnett College.

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Date Created: 08/23/16
Ch.2 Thinking Like an Economist • Scientific Method: economists form simplified models to answer questions about the economy similar to the way scientists use the Scientific Method. Theory/hypothesis: inflation caused by government printing too much money Test: Economists collect data… here one would examine other countries’ prices and how much money the government prints • Economists make a lot of assumptions ◦ This is done to make the world easier to understand • Economists use models to understand the economy Model 1: circular flow diagram: represents how goods, services, and money move through our economy. ◦ Model 2: Production Possibilities Frontier (PPF): a graph that shows the combinations of output that a given economy can possibly produce given the available factors of production (resources) Y is unattainable because it is out of the graph. X is inefficient because they will not be producing to full capacity. The points on the curve are considered efficient If an economy grows, the PPF can shift (more resources, better technology) Both endpoints can shift if we get more labor resources, so productivity can increase. The PPF also shows the opportunity cost of moving to different levels of production • Economics is divided into 2 broad fields: ◦ Microeconomics: the study of how households/Firms make decisions and interact in markets. ◦ Macroeconomists: the study of economy-wide phenomena… inflation, unemployment, growth… big picture. ◦ Economists often serve as policy advisors Positive Statements: claims that are based on facts, can be proven/disproven Normative Statements: claims that attempt to prescribe how the world should be


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