Problem 1.The production possibilities curve is an important model of how much an economy can produce given resources and technology.
a. What characteristic of the economy causes the production possibilities curve to bow outward. Explain.
Problem 2. The Circular Flow diagram is model of how the economy works. Explain how the model would change if the following events occurred:
a. Households increase savings.
b. Drastic spending cuts are implemented by the government.
Problem 3. looking at types of economic systems, which one closely resembles the US economy. Explain and support your answer.