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Econ “The Economist’s Toolbox”
Unit 1, Chapter 1, Section 4
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Objectives Demonstrate how and why economists use economic models
understand how and why economists use statistics, charts, tables, and graphs compare macroeconomics to microeconomics contrast positive economics with normative economics
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Economic Models How: by creating a simplified representation of complex economic forces Why: helps economists explain why things are as they are or predict future economic activity
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Statistics, Charts, Tables, & Graphs
How: by showing numbers in relation to other numbers Why: revealing patterns in the data examples: charts, line graphs, bar graphs, & Pie graphs
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Macroeconomics and Microeconomics
Units of Study: economic growth; economic stability; international trade Topics of Interest: money, banking finance; government taxing and spending policies; employment and unemployment; inflation Units of Study: consumer markets; business markets; labor markets Topics of Interest: markets, prices, costs, profits, competition, government regulation; consumer behavior; business behavior
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Positive Economics and Normative Economics
studies economic behavior as it is; using the scientific method to observe data, hypothesize, test, refine, and continue testing involves judgments of what economic behavior ought to be; it goes beyond the facts to to ask if actions are good
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Adam Smith lived 1723-1790 wrote The Wealth of Nations
laid the foundation for modern economics the word economics was not in his book at all reasoned that people behave in ways that satisfy their economic self-interest both buyer and seller benefit from each transaction, meaning an “invisible hand” guides the marketplace
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