ECON 114 Lecture Notes - Lecture 2: Fiscal Policy
Document Summary
Economists try to address their subject with a scienist"s objecivity. The scieniic method involves observaion, theory, and more observaion. Economists use theory and observaion like other scienists, but they do face an obstacle that makes their task especially challenging: experiments are oten diicult in economics. Assumpions can simply the complex world and make it easier to understand. The art in scieniic thinking is deciding which assumpions to make. Economists also use models to learn about the world that are most oten composed of diagrams and equaions. Economic models omit many details to allow us to see what is truly important. All the models are built with assumpions. Circular-flow diagram a visual model of the economy that shows how dollars low through markets among households and irms. Producion possibility fronier a graph that shows the combinaions of output that the economy can possibly produce given the available factors of producion and the available producion technology.
