Which type of economic statement is illustrated when the government decides what is produced, along with how much is produced?

• A. Descriptive analysis
• B. Normative analysis
• C. Empirical analysis
• D. Positive analysis

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the difference between positive and normative economic statements. Positive statements describe what is, based on facts and can be tested or verified, while normative statements express opinions about what ought to be and involve value judgments.
2. Step 2: Recognize that when the government decides what and how much to produce, it is making a decision based on what should be done, reflecting a value judgment rather than an objective fact.
3. Step 3: Identify that descriptive analysis involves describing economic phenomena without making judgments, and empirical analysis involves using data to test hypotheses, neither of which fits the decision-making context here.
4. Step 4: Conclude that the statement about government deciding production is a normative analysis because it involves a prescriptive judgment about economic choices.
5. Step 5: Summarize that normative analysis is characterized by recommendations or opinions on economic policies, which aligns with the government's role in deciding production quantities.