Which of the following is an example of a normative, as opposed to a positive, statement?

• A. The government should increase the minimum wage to improve living standards.
• B. The unemployment rate rose by 2% last year.
• C. A decrease in taxes will result in higher disposable income for consumers.
• D. An increase in the minimum wage leads to higher labor costs for firms.

Answer: (A)

Verified step by step guidance

1. Understand the difference between positive and normative statements: Positive statements describe the world as it is and can be tested or validated with data, while normative statements express opinions or what ought to be and involve value judgments.
2. Review each statement and determine if it is testable (positive) or opinion-based (normative):
3. For example, 'The unemployment rate rose by 2% last year' is a positive statement because it can be verified with data.
4. 'A decrease in taxes will result in higher disposable income for consumers' is also positive, as it predicts an outcome based on economic theory and can be tested.
5. 'An increase in the minimum wage leads to higher labor costs for firms' is positive since it describes a cause-effect relationship that can be analyzed.
6. The statement 'The government should increase the minimum wage to improve living standards' is normative because it includes the word 'should' and expresses a recommendation or value judgment rather than a testable fact.