Chapter 2 - Macro Economics

Economists view normative statements as

prescriptive, making a claim about how the world ought to be

Normative statements are

prescriptive, whereas postive statements are descriptive

Suppose an economy only produces two goods, robots and ice cream. Last month, the economy produced 10 robots and 200 gallons of ice cream. This month, the same economy produced 15 robots and 240 gallons of ice cream. Which of the following statments could explain this change?

-This month, the economy reduced the unemployment of its resources -This month, the economy experiecned an improvement in technology -This month, the economy experienced an increase in resources

Refer to Figure 2-4. Unemployment could cause this economy to produce at which point(s)?

T (the only one under/below the curved line, not directly on it or above it)

The production possibilities frontier illustrates

Answer: -None of the above is correct. Choices: -The trade-off between efficiency and equality -The combination of output that an economy should produce -The combination of output that each member of society should consume

Positive statements are

claims about how the world is

Factors of production are

inputs into the production process

A production possibilities frontier shifts outward when

the economy experiences economic growth

A production possibilities frontier can shift outward if

there is technological improvement

Refer to Figure 2-4. What is the opportunity cost to Picnicland of increasing production of burgers from 450 to 750?

450 hotdogs

Refer to Figure 2-1. Which arrow represents the flow of goods and services?

B (arrow is going from Firms directly to Markets for Goods and Services)

Refer to Figure 2-4. This economy cannot produce at which point(s)?

Q, S (these points are not directly on the curved line but are outside/above it)

Refer to Figure 2-4. This economy has the ability to produce at which point(s)?

R, T, U (shows these points directly on or below the curved line)

Refer to Figure 2-4. Efficient production is represented by which point(s)?

R, U (directly on curved line) (not above or below line but direcly on it)

Economic models

are simplifications of reality, and in this respect economic models are no different from other scientific models