ch2 - Chapter 2 Thinking Like an Economist 11:29:00 AM The...

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Chapter 2: Thinking Like an Economist 25/08/2007 10:29:00 The scientific method: observation, theory, and more observation -economists can’t manipulate a nation’s monetary policy to generate data -assumptions can simplify the complex world and make it easier to understand ex. to understand international trade, assume the world consists of only 2 countries/goods Economic models -circular-flow diagram; ex. economy has 2 types of decision makers: firms and households -firms produce goods and services using factors of production (labor, land, capital) -households own the factors of production and consume the goods they produce -markets for goods and services- households=buyers, firms=sellers -markets for the factors of production- household provide inputs firms use to produce goods *see diagram -the production possibilities frontier- shows the combinations of output that the economy can possibly produce given the available factors of production and technology
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This note was uploaded on 05/25/2008 for the course ECON 101 taught by Professor Balaban during the Fall '07 term at UNC.

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ch2 - Chapter 2 Thinking Like an Economist 11:29:00 AM The...

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