| Term | Definition |
| Macroeconomics | The study of economy-wide phenomena, including inflation, unemployment, and economic growth |
| Circular-Flow Diagram | A visual model of the economy that shows how dollars flow through markets among households and firms |
| Decision Makers | Firms and households |
| Normative Statements | Claims that attempt to prescribe how the world should be; more of an opinion |
| Efficient Levels of Production | The Economy is getting all it can; from the scarce resources available; the only way to produce less of the other good |
| Microeconomics | The study of how households and firms makes decisions; and how they interact in markets |
| Production possibilities frontier | a graph-combinations of output that the economy can possibly produce-Given the available
Factors of production
Production technology |
| Efficient Levels Of Production | The economy is getting all it can
From the scarce resources available
Points on the production possibilities frontier
Trade-off:
The only way to produce more of one good
Is to produce less of the other good |
| Inefficient levels of production | Points "Inside" production possibilities frontier |
| Households | Own factors of production
Consume goods and services |
| Markets | For gods and services
For factors of production |
| Opportunity cost of producing one good | Give up producing the other good
Slope of the production possibilities frontier |
| Opportunity Cost | Give up producing the other good;slope of the production possibilities |
| Firms | Produce goods and services
Use factors of production / inputs |
| Production Possibilities Frontier | A graph that shows the combination of output that the economy can possibly produce given the available factors of production and the available production technology |
| Positive Statements | Claims that attempt to describe the worlds as it is: for of a fact |
| Markets for inputs | Firms – buyers
Households - sellers |
| Inefficient levels of production | Points inside production possibilities frontier |
| Markets for goods and Services | Firms – sellers
Households – buyers |
