The American Economy: A Student Study Guide

A Student Study Guide

Wade L. Thomas, Robert B. Carson

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9780765607591
• eBook ISBN: 9781317414674
• Topic: Business
• Subtopic: Economic Theory
• Index: Business

A student study guide to accompany the principle work, 'The American economy: how it works and how it doesn't'.

Part 1

Conceptual Foundations

Chapter 1

Toward a Twenty-First Century Economic Agenda: Goals and Possibilities

KEY TERMS

Scarcity	Traditional economies
Opportunity cost	Market economies
Productivity	Command economies
Law of increasing cost	Microeconomics
Economic agenda	Macroeconomics
Positive economics	Capital goods
Production possibilities curve	Consumer goods
Normative economies	Factors of production
Inductive method	Ceteris paribus
Deductive method

CHAPTER SUMMARY

1. The social science of economics exists because the economic resources required to satisfy unlimited human wants are scarce. Because of these scarcities, choices must be made between alternative economic activities.

2. Economic inquiries and models are grounded in the use of logical methods. Economic reasoning must be carefully formulated to avoid erroneous arguments or fallacies.

3. Economics entails reliance upon scientific methods and extols objective inquiry. Nevertheless, economics also incorporates values and prescribes policies to further those values. Laissez-faire economics prescribes no or limited government intervention in the economy. Interventionist views suggest that economic performance can be improved through government policies.

4. A set of economic goals provides the criteria upon which to assess economic performance.

5. Because of scarcity, society has to choose what to produce and how much to allow. The situation is graphically depicted in the production-possibilities curve. The curve shows the tradeoff between two goods (opportunity cost). The model can also be used to illustrate unemployment, underemployment, and economic growth.

6. Numerous items can be placed on the economic agenda for today and for the next century. The central agenda item, upon which the achievement of nearly all other economic goals is contingent, is to sustain economic growth. Sustaining economic growth depends largely upon how society addresses the tradeoff between capital and consumer goods.

7. Economic planning and policy formulation take place in all economies. The process involves applying economic reasoning to help society solve problems that usually have their source in the scarce resource versus unlimited wants dilemma.

SELF EXAMINATION

True/False

1. The discipline of economics and what economists do are well defined.

2. The basic economic problem is that resources are scarce and human wants are unlimited.

3. The inductive method begins with a hypothesis and applies facts for verification.

4. The assumption of ceteris paribus means using a model that involves a hypothetical catering service that delivers all outputs via a medium-sized bus.

5. Positive economics is the interpretation of economic facts to arrive at goals which are a reflection of individual value judgments.

6. An equitable distribution of income means that the distr...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface
• Part 1 Conceptual Foundations
• Part 2 Microeconomics
• Part 3 Macroeconomics
• Part 4 International Economics