Which of the following is an example of a positive economic statement?
A) The government should ideally work as a welfare state.
B) An increase in income causes an increase in savings.
C) Economics is the most useful social science.
D) Eliminating poverty is more important than reducing inflation.
The Correct Answer and Explanation is :
The correct answer is B) An increase in income causes an increase in savings.
Explanation:
A positive economic statement is one that can be tested or verified by referring to available evidence or data. It describes relationships or outcomes that are factual and based on real-world observations, not on opinions or value judgments. Positive economics deals with “what is” rather than “what ought to be.”
In this case, option B states that “An increase in income causes an increase in savings.” This is a testable hypothesis because one could collect data on income levels and savings rates to verify whether the relationship holds true in real-world economies. This is an example of a positive economic statement because it describes an observable cause-and-effect relationship without making any value judgments or stating what should happen.
Now, let’s look at the other options:
- A) The government should ideally work as a welfare state: This is a normative economic statement. It expresses an opinion about what the government “should” do, based on the personal beliefs of the speaker. Normative statements are subjective and cannot be tested against facts.
- C) Economics is the most useful social science: This is also a normative statement. It is a value judgment about the relative importance of economics compared to other social sciences, which cannot be proven or disproven with data.
- D) Eliminating poverty is more important than reducing inflation: This is another normative statement. It reflects a personal or societal value judgment, comparing the importance of two issues, which again cannot be empirically tested.
Thus, B is the only positive economic statement because it describes a testable relationship that can be backed by data.
Let me generate the image based on this concept.
Here’s the image illustrating the difference between positive and normative economic statements. The left side shows a positive statement with data to support it, and the right side displays a normative statement, emphasizing the subjective nature of opinions in economics. Let me know if you’d like further explanation or adjustments!
