Answer: D
Difficulty: Medium
AACSB: Application of Knowledge
Topic: Positive Economics and Normative Economics
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15) Which of the following is an example of a normative economic statement?
A) An increase in government expenditure will lead to an increase in well‐being.
B) An increase in the money supply will lead to an increase in the inflation rate.
C) An increase in income is accompanied by an increase in savings.
D) An increase in income is accompanied by an increase in consumption.
Answer: A
Difficulty: Medium
AACSB: Application of Knowledge
Topic: Positive Economics and Normative Economics
16) Which of the following statements is true?
A) Positive economics deals with issues that are subjective.
B) Normative statements depend on personal preferences.
C) Positive economics recommends what people ought to do.
D) Normative economic statements can be confirmed or disproven.
Answer: B
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Positive Economics and Normative Economics
17) Which of the following statements correctly differentiates between positive and normative economics?
A) Positive economics is descriptive, whereas normative economics is advisory.
B) Positive economics describes what people ought to do, whereas normative economics describes what
people actually do.
C) Positive economics is based on judgments, whereas normative economics is not.
D) Positive economics can only be applied to microeconomics, whereas normative economics can be
applied to both microeconomics and macroeconomics.
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Positive Economics and Normative Economics
18) Positive economics is descriptive because ________.
A) it is based on ethical judgments.
B) its predictions cannot be verified with data.
C) it prescribes what an individual or society ought to do.
D) it explains what has happened or predicts what will happen.
Answer: D
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Positive Economics and Normative Economics
5
Copyright © 2019 Pearson Education, Ltd.
19) Which of the following statements is true?
A) Positive economics describes what people ought to do.
B) Normative economics describes what people actually do.
C) Positive economics generates objective descriptions that can be verified with data.
D) Normative economics is free from the value judgments, tastes, and preferences of economic agents.
Answer: C
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Positive Economics and Normative Economics
20) Differentiate between positive and normative economics using examples.
Answer: Positive economics is analysis that generates objective descriptions or predictions about the
world that can be verified with data. It is analysis that describes what people actually do. ʺA 5 percent fall
in the unemployment rate will lead to a 2 percent increase in the inflation rateʺ is an example of a positive