Outputs Goods and Services Economics ECON 162 9 4 15 Economy as a Production Function Inputs Resources Microeconomics Individual decision making Firms Households Markets Macroeconomics Aggregate economic variables Inflation GDP Gross Domestic Product Unemployment Money Supply Interest Rates Exchange Rates Positive Analysis Factual Testable T or F What is Descriptive Objective Value Free If X then Y The Methodology of Normative Analysis What ought to be Prescriptive Opinions Not Testable Subjective Values are Explicit How do Economists Study the World Model Building Complex Reality Use of Assumptions Simple Model Overriding Assumptions maker better off 2 More is better 3 Ceteris Paribus Everything else held constant Scientific Method 1 Rational self interest economic decisions are made with the purpose of making the decision