What is the difference between positive and normative economics? How can knowledge of positive economics be useful in normative economics?


Positive economics deals with "what is" while normative economics deals with "what ought to be." Knowledge of positive economic theories (the causal relationship between economic variables) can guide us in finding workable policies designed to achieve a normative economic goal.

Economics

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In the Keynesian view, a reduction in the marginal income tax rate would cause

a. output to rise and the price level to fall. b. both output and the price level to rise. c. output to rise with the price level unchanged. d. the price level to rise with output unchanged.

Economics

Suppose the economy has a recessionary gap. By using an expansionary monetary policy, the Fed can

A) raise real GDP without increasing the price level. B) raise real GDP and the price level. C) raise real GDP and decrease the price level. D) raise the price level alone, but cannot increase real GDP.

Economics

Even if there are significant barriers to entry, firms may not be highly profitable

a. Substitute product offerings among rivals b. The ability of consumers to switch to substitute products easily c. All of the above d. None of the above

Economics

When a monopoly increases its output and sales,

a. both the output effect and the price effect work to increase total revenue. b. the output effect works to increase total revenue, and the price effect works to decrease total revenue. c. the output effect works to decrease total revenue, and the price effect works to increase total revenue. d. both the output effect and the price effect work to decrease total revenue.

Economics