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