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Ch 2 to 8 Economics Lecture Notes

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Jan.7th 2019 Micro Vs Macro International trade Micro (Individually (how to make decisions)) Macro (all the things, big picture.) GDP(Gross domestic product) Deficits /Debits Price level( Inflation) Recession -Unemployment Fiscal policy Exchange rates Chapter 2 Economics is a social science not a natural science Method of inquiry Scientific method -observation \theory \more observation ={e.g Economist observes increasing prices, develops theory of inflation} - Prices rise when governments print too much money. - Collects data on many prices from many countries. Making assumptions -Simplify the complex world -easier to understand ={e.g international trade. Assume 2 goods/ 2 countries} -economic models Circular Flow Diagram Represents the organization of the economy -Households\ firms\ factors of production -Factors of production: Land, Labour or capital (Input) -Capital: buildings & Machines& equipments (physical capital need to produce) Second Economic Model PPF(production possibilities frontier) Definition: The combinations of output that the economy can possibly produce given the available factors of production & the available technology A,B,C,D,E are the points in the diagram are feasible& efficient Opportunity cost Definition: the cost of something is what you give up to get it. -PPF shows us opportunity cost of one good, as measured in terms of the other good. -Slope of the PPF -Opportunity cost is increasing( Move downward in PPF) Shift out -Economic growth -T ...
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