Unit 1: Fundamental Concepts

Introduction

What’s in This Chapter? In this unit, we discuss how to define economics and look at what the study of economics is all about. We study economics to determine how to best increase our nation’s wealth. In this...

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Section 1: Economics

The Definition of Economics What is economics all about? Is it the study of money? Is it about trade-offs and scarce resources? Is it about inflation, unemployment, and deficits? Is it about eliminating poverty? All of the above...

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Section 2: The Production Possibilities Curve

Production Choices When we study how a country can best increase its wealth, we must look at its production behavior. In order to produce, a country must use its resources, including land, labor, capital, and raw materials. A...

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Section 3: Economic Growth

Causes of Economic Growth Economic growth occurs when the economy realizes greater production levels. In the graph below, the curve shifts outward to the right (for instance, through point F from the graph in the previous...

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Section 4: The Circular Flow

The Simple Circular Flow Model An economy consists of many persons and groups who participate in various economic activities. In its simplest form, an economy consists of buyers and sellers. Sellers are mostly businesses that...

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Section 5: Economic Systems

The Three Economic Systems 1. A laissez-faire economy. Laissez-faire is French for “let do.” It represents a pure capitalist system, or a so-called price system, in which the supply and demand behavior of businesses...

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Section 6: Important Concepts and Definitions

In this section we will clarify several concepts that we will come across throughout our text. Nominal and Real Values Nominal values, such as nominal prices, nominal earnings, nominal wages, nominal interest rates, and nominal...

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Section 7: Economics and Critical Thinking

Question Everything Critical thinking is particularly important in today’s Internet society and world of information overload. Authors, journalists, economists, politicians, talk-show hosts and even Hollywood celebrities and...

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Test Your Knowledge!

  Time limit: 0 Quiz-summary 0 of 10 questions completed Questions: 1 2 3 4 5 6 7 8 9 10 Information This is a ten question multiple-choice quiz covering the material in this Unit. I hope you do well! You have already...

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