Positive economic statement versus normative economic statement
Explanation of Solution
Positive economics is an economic stream that puts an emphasis on defining, quantifying, and attempting to explain economic advancements, aspirations and related events. This is based on unbiased analysis of data, significant facts, and related estimates and tries to create cognitive connection that can assist in determining and evaluating the growth of economic principles. These statements are accurate, concise and clearly calculable and they can also be evaluated against substantial proof. Example of positive statement is, medical care provided by the government leads to increase in public expenditure. The statement here is based on facts and does not have an attached value judgment; this can be verified for its authenticity by researching about medical care that governments provide.
Normative economics concentrates more on moral judgments, political and view oriented declarations regarding "what should be" which is directed at investment programs,
Introduction:
The two classic branches of modern economics are positive economics and normative economics. Positive economics defines different economic concepts and explains them. These statements are facts that can be verified and on the other hand normative economics concentrates on the importance of economic equity, they are not facts, instead they're the views and thoughts of some economists who tell us what they believe.
Want to see more full solutions like this?
Chapter 2 Solutions
Principles of Economics (Second Edition)
- What steps are involved in developing and testing an economic theory or model? What are the criteria for a useful theory or model?arrow_forwardWhich of the following is a positive, rather than a normative, statement?a. Law X will reduce national income.b. Law X is a good piece of legislation.c. Congress ought to pass law X.d. The president should veto law X.arrow_forwardSummarize changes to the distribution of income since 1980. Is is analysis positive or normative? Why?arrow_forward
- Give an economic relationship in which individual effect of independent variables are difficult to separate in the presence of multicollinearity.arrow_forwardDiscuss A Self-Sufficient Economyarrow_forwardWhy isn’t money considered capital in economics? Which of the following are microeconomic issues? Which are macroeconomic issues? a. How will an increase in the price of Coca-Cola affect the quantity of Pepsi Cola sold? b. What will cause the nation’s inflation rate to fall c. How does a quota on textile imports affect the textile industry? d. Does a large federal budget deficit reduce the rate of unemployment in the economy? Explain the importance of the ceteris paribus assumption for an economic model. Analyze the positive versus normative arguments in the following case. What statements of positive economics are used to support the requiring of airbags? What normative reasoning is used? Should the Government Require Air Bags? Technological advances continuously provide new high-tech options to save lives that add to the price of cars, such as cameras, radar, and airbags. Airbag advocates say airbags will save lives, and the government should require them in all cars.…arrow_forward
- Classify the following topics as relating to microeconomics or macroeconomics. a family’s decision about how much income to save the effect of government regulations on auto emissions the impact of higher national saving on economic growth a firm’s decision about how many workers to hire e. the relationship between the inflation rate and changes in the quantity of money.arrow_forwardClassify the following topics as relating to microeconomics or macroeconomics. a. a family's decision about how much income to save b. the effect of government regulations on auto emissions c. the impact of higher national saving on economic growth d. a firm's decision about how many workers to hire e. the relationship between the inflation rate and changes in the quantity of moneyarrow_forward. Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of goods and services and the flow of dollars for each of the following activities. Paul purchases a pair of shoes for $30 Shannon receives a salary of $1,500 per week at the supermarket which she works Honda Limited receives $20,000 for the sale of a sports utility vehicle Mark earns $2,000 from his 15 percent ownership of Apple stock Classify each of the following statements as positive or normative. Explain. Bahamas faces a trade-off between inflation and unemployment The ECCB should reduce the interest rates St. Lucia ought to provide a pension for all citizens. 4.Higher tax rates discourage savings and working Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of each of the following scenarios. The market for gasoline Scenario 1: Electric…arrow_forward
- If two economies are identical, except the savings rate in one economy is higher, explain why we might expect the economy with the higher savings rate to grow faster and in that sense be healthier.arrow_forwardWhat are the key ingredients of an economic model, and why are models useful?arrow_forwardWhat is the difference between positive and normative economic analysis? Give anexample for each.arrow_forward
