Question

Classify each of the following statements as positive or normative.

Statement positive negative
Economic development should not take place at the expense of social justice.
The government can increase labor productivity by improving public education.
Society faces a short-run trade-off between inflation and unemployment.
The Federal Reserve should take action to lower the inflation rate.
The government must take action to reduce the unemployment rate.

Answer 1

Positive Economics is the branch that deals with analysis of relationship among variable for establishment of cause and effects.

Normative Economics is the branch that deals with value judgement, what ought to be and not.

Statement Classification

1. Economic development should not Normative Economics

take place at the expense of social justice.

2. The government can increase labor Positive Economics

productivity by improving public education.

3. Society faces a short-run trade-off Positive Economics

between inflation and unemployment.

4. The Federal Reserve should take Normative Economics

action to lower the inflation rate.

5. The government must take action Normative Economics

to reduce the unemployment rate.