Multiple Choice
Which of the following scenarios would be considered a positive economic statement?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which of the following statements is an example of a normative statement?
A
The unemployment rate in the country is 5%.
B
A decrease in taxes can boost economic growth.
C
Increasing the minimum wage will lead to higher unemployment.
D
The government should increase spending on healthcare.
Verified step by step guidance1
Step 1: Understand the difference between positive and normative statements. Positive statements describe facts or cause-and-effect relationships and can be tested or validated. Normative statements express opinions or value judgments and cannot be tested.
Step 2: Review each statement to classify it. For example, 'The unemployment rate in the country is 5%' is a positive statement because it states a measurable fact.
Step 3: Identify statements that predict outcomes based on economic theory or data, such as 'A decrease in taxes can boost economic growth' or 'Increasing the minimum wage will lead to higher unemployment.' These are positive statements because they can be tested.
Step 4: Look for statements that include words like 'should' or express what ought to be done. For example, 'The government should increase spending on healthcare' is a normative statement because it reflects a value judgment or recommendation.
Step 5: Conclude that the normative statement is the one expressing an opinion or recommendation, which in this case is 'The government should increase spending on healthcare.'
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