econ assing. 1+

econ assing. 1+ - Assignment # 1 Macro 251 October 4, 2007...

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(A) Land, Labor, G&S G&S FOP Revenue Income Wages, Rent, Households Firms Market for Market for FOP Spending Flow of inputs and outputs Flow of Assignment # 1 Macro 251 October 4, 2007 Assignment #1 1. The Circular Flow Diagram: A. This is a visual model of the economy and it shows how the money flows through the markets, households and firms. There are two types of markets; the market for goods and services (G&S) and also the market for factors of production (FOP). There are also two types of players interacting with the markets; households and firms. - On the top is the Market for G&S. This is the market where firms sell and households buy. - On the bottom is Market for FOP. This is the market where households sell and firms buy. - On the left are the Firms. They buy or hire the factors of production and use them to produce the goods and services. Once produced, they sell the goods and services. - On the right are the Households. They own the factors of production which they sell or rent to the firms for income. They also buy and consume the goods and services produced by the firms. - The outer loop is the flow of dollars through the markets, firms and households. - The inner loop is the flow of inputs and output through the markets, firms and households. B. Another term for Factors of Production is inputs. Factors of Production are the resources that the economy uses to produce goods and services. The examples of FOP are land, labor and capitol.
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(D (C) (B) (A) 10% ownership Quart of Movie 1 hr. of $7.00 $10,000.00 $4.50 Households Firms Market for Market for FOP $1.00 Flow of inputs and outputs Flow of E Wine Cheese Feasible Infeasibl e Wine Cheese 2. 3. Capital refers to what is used in the production of goods and services. A couple examples of capital in economics are buildings and machines. 4. PPF of Wine and Cheese A. The shape of the PPF is bow shaped because resources are being taken away from producing wine and being used on producing cheese. The opportunity cost of wine increases as the production of cheese increases.
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5 10 10 20 50 Economics Sociology 0 20 50 50 0 0 Shirts Shirts Comp. Comp. 10 0 10 0 China U.S. 5. The difference between absolute advantage (AA) and comparative advantage (CA) is that AA is the ability to produce a good using fewer inputs than another country as opposed to CA, which is the ability to produce a good at a lower opportunity cost than another country. CA is more important when trying to determine trade patterns
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This note was uploaded on 04/18/2008 for the course ECON 251 taught by Professor Mattson during the Fall '07 term at St. Thomas.

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econ assing. 1+ - Assignment # 1 Macro 251 October 4, 2007...

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