Give an example of a positive economic statement and a normative economic statement
What will be an ideal response?
Student responses will vary. What is important is that the positive statement is objective and attempts to explain "what is". The normative statement should include some value judgment or "what should be".
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Use the following production possibilities frontiers to answer the next question.
Curve (a) is the initial frontier for the economy, and the nation is initially producing combination P. A shift from curve (a) to curve (b) suggests that the economy can then increase its production of capital goods
A. so as to produce the combination L. B. and consumer goods simultaneously, except at the point where the curve intersects the vertical axis. C. but will have to hold constant its production of consumer goods. D. only if it reduces its production of consumer goods.
The government purchases multiplier equals the change in ________ divided by the change in ________
A) consumption spending; government purchases B) government purchases; consumption spending C) government purchases; equilibrium real GDP D) equilibrium real GDP; government purchases
Rising inflation causes quantity demanded to decline, because ________
A) the central bank raises the nominal interest rate by more than the increase in expected inflation B) households and businesses are reluctant to spend when prices rise C) higher inflation causes the IS curve to shift to the left D) all of the above E) none of the above
Which of the following statements is true about Mercantilism?
a. A weak state is needed to regulate and control the economy. b. Adam Smith was the intellectual founder of mercantilism. c. Individual economic freedoms, property rights, and private contracts are more important than the interests of the public. d. There are no universal principles of economics. e. none of the above.