ECON 2010 Lecture Notes - Lecture 2: Scientific Method, Business Cycle
18 Sep 2018
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Document Summary
Prices rise when the government prints too much money. Increase in the overall level of prices in the economy. Society faces a short run trade-off between inflation and unemployment. When the government injects money into the economy, it stimulates the overall level of spending. Chapter 2 notes: economics is a science, devise theories, collect data, debate these theories, use the scientific method. Then you analyze the results: economists have to make assumptions, assumptions make it easier to understand the world. You must decide which assumptions to make depending on your outcome: must make different assumptions to answer different questions. Studying short/long term effects: economists develop models, determine how an economy behaves and simplify the situation, using diagrams, equations, etc, ex: circular flow diagram **need to know for test. Shows how dollars flow through markets: decision makers= households and firms, firms: produce goods and services for input using factors of production.
