Eco 2020 - Chapter 2 Macro

Positive economics refers to the analysis of economic issues based on objective facts and data, without incorporating value judgments or opinions. It focuses on describing and explaining economic phenomena as they are, rather than how they should be. The given answer accurately captures this concept by stating that positive economics involves a situation where an increase in one variable is linked to an increase in another variable, highlighting the cause-and-effect relationship between economic variables.

Macroeconomics is a branch of economics that focuses on the workings and problems of the economy as a whole. It analyzes variables such as GDP growth and unemployment to understand the overall performance and trends of the economy. Unlike microeconomics, which examines individual decision-making at firms and households in specific industries and markets, macroeconomics takes a broader perspective and looks at the aggregate behavior of the economy. By studying macroeconomics, economists can gain insights into the factors that influence economic growth, inflation, and unemployment rates.

Normative economics refers to the branch of economics that deals with value judgments and opinions about what ought to be, rather than what is. It focuses on subjective opinions and recommendations regarding economic policies and outcomes. The given answer, which states that normative economics is a situation in which an increase in one variable is associated with a decrease in another variable, is incorrect. It does not accurately describe normative economics, which is about value judgments rather than the relationship between variables.

Scarcity refers to the limited availability of resources in relation to the unlimited wants and needs of individuals and society. It is the fundamental economic problem that arises due to the fact that resources are scarce and must be allocated efficiently. In this context, scarcity can be applied to various aspects of life, such as the availability of food and drink, resources in general, or even the limited number of movie tickets in the market. The concept of scarcity highlights the need for individuals and society to make choices and prioritize their wants and needs based on the limited resources available.

Constants are situations where an increase in one variable does not result in any change in another variable. This means that the relationship between the two variables remains constant and unaffected by changes in one variable. In other words, the value of one variable does not depend on or influence the value of the other variable.

Positive correlation refers to a relationship between two variables where they both move in the same direction. This means that as one variable increases, the other variable also increases, and as one variable decreases, the other variable also decreases. In other words, there is a direct relationship between the two variables, and they tend to move together.

Negative correlation refers to a relationship between two variables where as one variable increases, the other variable decreases. In other words, when one variable goes up, the other variable goes down. This indicates an inverse relationship between the two variables, suggesting that they move in opposite directions.

The relative price of gas refers to the price of gasoline compared to the average price of all other goods and services in the economy. This means that it takes into account the overall price level of goods and services in the economy and compares it to the price of gasoline specifically. It provides a measure of how expensive or cheap gasoline is in relation to other goods and services, allowing for analysis of its affordability and impact on the economy.

Correlation refers to the relationship between two variables where they tend to occur together, but it does not necessarily imply a cause-and-effect relationship. On the other hand, causation implies that one event must happen in order for the other event to occur. In other words, causation suggests a direct cause-and-effect relationship between two variables. It is important to note that correlation does not always indicate causation, as there may be other factors at play that influence the relationship between the variables.