ECN 104 Chapter Notes - Chapter 2: Business Cycle, Fiscal Policy, Macroeconomics

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pearwombat46

22 Oct 2012

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Economists play 2 roles: scientists: try to explain the world, policy advisors: try to improve it. The scientific method: observation, theory, and more observation. Economist employ the scientific method, the dispassionate development and testing of theories about how the world works. Assumptions simplify the complex world, make it easier to understand. Ex. to study international trade, assume 2 countries and 2 goods (unrealistic but simple to learn) Model: a highly simplified representation of a complicated reality: composed of diagrams and equations, economists use models to study economic issues. Circular-flow diagram: a visual model of the economy that shows how dollars flow through markets among households & firms. Two types of decision makers ( actors ): households, firms. Two markets: the market for goods and services. Households are buyers and firms are sellers: the market for factors of production. Households are sellers and firms are buyers.

Related Questions

Why do economists use economic models when making predictions or assumptions about the economy? Which economic model do you believe is the most beneficial to YOU at the present time? Why? *Economic Models: circular flow diagram, production possibility frontier, supply, and demand.

goldalligator149

Which of the following is true regarding this economic model?

a) Because it does not take into account the role of government, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy.
b) Because it does not take into account international trade, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy.
c) While simple, the circular-flow diagram can still be useful for the purposes of modeling how dollars and resources move throughout an economy.
d) Because, in reality, the economy is very large, the simplicity of the circular-flow diagram makes it useless for the purposes of modeling how dollars and resources move throughout an economy.

maroonferret252

Which of the following is true regarding this economic model?

A. Because it does not take into account international trade, the circular-flow diagram is useless for the purposes of modelling how dollars an economy. and resources move throughout

B. While simple, the circular-flow diagram can still be useful for the purposes of modelling how dollars and resources move throughout an economy.

C. Because it does not take into account the role of government, the circular-flow diagram is useless for the purposes of modelling how dollars and resources move throughout an economy.

D. Because, in reality, the economy is very large, the simplicity of the circular-flow diagram makes it useless for the purposes of modelling how dollars and resources move throughout an economy.

greyalpaca202

ECN 104 Chapter Notes - Chapter 2: Business Cycle, Fiscal Policy, Macroeconomics

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