Which of the following is a positive economic statement?
The correct answer and explanation is:
A positive economic statement is one that describes the world as it is, based on objective facts and can be tested or verified. It does not involve any judgments or opinions about what should happen. The statement is simply concerned with describing relationships, events, or phenomena in a factual manner.
For example, if you have options like the following:
- “Increasing the minimum wage will reduce unemployment.”
- “The unemployment rate is 5% in the United States.”
- “Higher taxes on the wealthy will cause an economic recession.”
- “Education funding should be increased.”
The second option, “The unemployment rate is 5% in the United States,” is a positive economic statement. It is a statement of fact that can be verified through data. It does not involve any subjective judgment about what ought to be done, but simply reports an observable fact.
The first and third options are examples of statements that could be tested but contain cause-and-effect assumptions that make them more of a normative or predictive nature. The last statement, “Education funding should be increased,” is clearly normative because it expresses a value judgment about what should happen.
In economics, distinguishing between positive and normative statements is important because positive statements can be analyzed, tested, and evaluated based on data, while normative statements involve opinions that are influenced by personal values or political beliefs. The focus on positive economics allows economists to study economic phenomena using factual evidence without necessarily promoting a particular policy or outcome.