Economists use economic models to study realworld economic issues. The two basic economic models are Production
Possibility Frontier (PPF) and the Circular Flow Diagram.
a. How does the production possibility frontier model help us understand the feasible and efficient amounts that can be
produced? What does the outward shift in production possibility curve indicate?
b. What are the major markets and economic decision makers (economic agents) the circular flow diagram indicate? What is
the importance of the diagram in various markets of the economy or economic interactions (transactions)?

 

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