From a neoclassical view, which of the following is a true statement?

• A. Normative analysis is concerned only with factual statements about the economy.
• B. Neoclassical economics does not distinguish between positive and normative analysis.
• C. Positive analysis involves value judgments about economic policies.
• D. Positive analysis describes what is, while normative analysis prescribes what ought to be.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the distinction between positive and normative analysis in economics. Positive analysis deals with objective, fact-based statements that describe how the economy works, without any judgments.
2. Step 2: Recognize that normative analysis involves subjective value judgments and opinions about what economic policies or outcomes ought to be, reflecting personal or societal preferences.
3. Step 3: Evaluate each given statement by checking if it correctly reflects these definitions: for example, whether normative analysis is only about facts (it is not), or if positive analysis involves value judgments (it does not).
4. Step 4: Identify that the statement 'Positive analysis describes what is, while normative analysis prescribes what ought to be' correctly captures the neoclassical distinction between these two types of economic analysis.
5. Step 5: Conclude that the true statement from a neoclassical perspective is the one that clearly separates positive (descriptive) and normative (prescriptive) analysis as defined above.