Multiple Choice
Why does an increase in literacy rates often accompany an increase in per capita income?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which of the following is an example of positive analysis in economics?
A
Recording economic data in dollars in the United States to measure GDP.
B
Recommending that taxes be lowered to improve welfare.
C
Arguing that the government should increase the minimum wage.
D
Suggesting that income inequality is unfair.
Verified step by step guidance1
Understand the difference between positive and normative analysis in economics. Positive analysis deals with objective, fact-based statements that can be tested or verified, while normative analysis involves subjective opinions or value judgments about what ought to be.
Review each option and determine whether it is a positive or normative statement. For example, recording economic data in dollars to measure GDP is a factual, measurable activity, which aligns with positive analysis.
Identify that recommending tax cuts to improve welfare, arguing for a higher minimum wage, and suggesting income inequality is unfair are all normative statements because they involve opinions or value judgments about what should happen.
Conclude that the example of positive analysis is the one that involves objective measurement or description without making a judgment, which is recording economic data in dollars to measure GDP.
Summarize that positive analysis focuses on 'what is' and can be tested, whereas normative analysis focuses on 'what ought to be' and is based on personal values.
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