Chapter 2

a visual model of the economy that shows how dollars flow through markets among households and firms

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

the study of how households and firms make decisions and how they interact in markets

the study of economy-wide phenomena, including inflation, unemployment, and economics growth

claims that attempt to describe the world as it is

claims that attempt to prescribe how the world should be