Which of the following is an example of a positive economic statement?
The correct answer and explanation is:
A positive economic statement is one that can be tested, measured, or verified based on facts. It describes the world as it is, without expressing any judgments or opinions. An example of a positive economic statement would be:
“An increase in the minimum wage leads to a reduction in employment for low-skilled workers.”
This statement is positive because it makes a claim that can be tested through data and empirical research. Researchers can gather evidence to verify if an increase in the minimum wage indeed leads to a reduction in employment for low-skilled workers, or if the statement is inaccurate.
Positive economic statements focus purely on what is, rather than what should be. They are objective, factual, and observable. For instance, statements about GDP growth rates, inflation rates, or unemployment rates are all positive because they provide measurable data that can be empirically assessed. A key feature of these statements is that they do not involve any opinions or value judgments.
On the other hand, normative economic statements involve value judgments and express opinions on what ought to be. For example, “The government should raise the minimum wage to reduce poverty” is a normative statement. It suggests a course of action based on a judgment, but it cannot be directly tested or proven true or false through data alone.
Positive economics provides the foundation for creating policies because it is based on facts that can be analyzed and tested. In contrast, normative economics is more subjective and reflects personal beliefs about what should happen in the economy. Both types of statements are important, but positive economics forms the basis of much of economic theory and research.