Answer to Question #316431 in Microeconomics for ghani

Question

Define Positive and Normative Economics and classify each of the following statements. (5)

a) Society faced a short-run tradeoff between inflation and unemployment

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

c) The State bank of Pakistan should reduce the rate of printing new currency notes

d) Society ought to require welfare recipients to look for jobs. e) lower tax rates encourage more work and more saving

f) Firms are showing a positive response to increase in demand of product

g) Decision of a worker to work less due to lower wages

h) Government legislation is targeting firms charging too high prices

Answer 1

Positive economics is concerned with the development and testing of positive statements about the world that are objective and verifiable while Normative statements derive from an opinion or a point of view.

a) Society faced a short-run trade-off between inflation and unemployment- Positive

b) A reduction in the rate of money growth will reduce the rate of inflation- Positive

c) The State bank of Pakistan should reduce the rate of printing new currency notes- Normative

d) Society ought to require welfare recipients to look for jobs- Normative

e) lower tax rates encourage more work and more saving- Positive

f) Firms are showing a positive response to increase in demand of product- Positive

g) Decision of a worker to work less due to lower wages- Normative

h) Government legislation is targeting firms charging too high prices- Normative