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Circular-flow diagram
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a visual model of the economy that shows how dollars flow through markets among households and firms
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Production possibilities frontier
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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
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Microeconomics
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the study of how households and firms make decisions and how they interact in markets
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Macroeconomics
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the study of economy-wide phenomena, including inflation, unemployment, and economic growth
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Positive statements
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claims that attempt to describe the world as it is
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Normative statements
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claims that attempt to prescribe how the world should be
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