Positive economics answers the question, "What ought to be?" Normative economics predicts the consequences of alternative actions, answering the questions, "What is?" or "What will be?"
Indicate whether the statement is true or false
FALSE
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A corrective subsidy induces the ________ to the socially optimal level
A) consumers of a negative externality to increase the quantity consumed B) producers of a negative externality to increase the quantity produced C) consumers of a positive externality to increase the quantity consumed D) producers of a positive externality to reduce the quantity produced
Gross domestic product refers to the: a. market value of all final goods and services produced in an economy during a year
b. market value of all goods and services produced by resources located outside the country. c. market value of all intermediate goods and services produced by resources located within the country. d. market value of all used goods exchanged within the country.
In the aggregate expenditures model, the equilibrium real GDP is
A. assumed to be equal to the full-employment real GDP level. B. always less than the full-employment real GDP level. C. always above the full-employment real GDP level. D. not necessarily equal to the full-employment real GDP.
Suppose an economy has an upward-sloping aggregate supply curve and a recessionary GDP gap equal to $50 billion. If aggregate demand increases by a total of $50 billion,
A. The resulting equilibrium GDP will be greater than full-employment GDP because of demand-pull inflation. B. The resulting equilibrium GDP will be lower than full employment GDP because some of the additional spending will drive up prices instead of increasing output. C. The recessionary GDP gap will be eliminated. D. Cyclical unemployment will increase.