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Classify each of the following statements as positive or normative. Explain. a. Society faces a short-run trade-off between inflation and unemployment. b. A reduction in the rate of money growth will reduce the rate of inflation. c. The Federal Reserve should reduce the rate of money growth. d. Society ought to require welfare recipients to look for jobs. e. Lower tax rates encourage more work and more saving.

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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

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Section
BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 2, Problem 6PA
Textbook Problem
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Classify each of the following statements as positive or normative. Explain.

a. Society faces a short-run trade-off between inflation and unemployment.

b. A reduction in the rate of money growth will reduce the rate of inflation.

c. The Federal Reserve should reduce the rate of money growth.

d. Society ought to require welfare recipients to look for jobs.

e. Lower tax rates encourage more work and more saving.

To determine
Positive and normative statements.

Explanation of Solution

Option (a):

Society faces a short-run trade-off between inflation and unemployment is a positive statement. Because, it is focused on cause and effect of behavioral relationship between inflation and unemployment. When the inflation increases, it causes a decrease in the level of unemployment.

Option (b):

A reduction in the rate of money growth will reduce the rate of inflation is a positive statement. The change in one factor which causes a change in another factor is related to positive economic view.

Option (c):

The Federal Reserve should reduce the rate of money growth is a normative statement...

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