Skip to main content
Back

Positive and Normative Analysis quiz #2

Control buttons has been changed to "navigation" mode.
1/39
  • Why do you think economic freedom is essential for political freedom?
    This is a normative question, expressing an opinion about the relationship between economic and political freedom.
  • Which term implies the least degree of confidence in an economic generalization?
    A hypothesis implies less confidence than a tested positive statement.
  • How does the market system promote progress?
    The market system promotes progress through positive incentives and factual increases in efficiency.
  • What requirement ensures that economic data is recorded in dollars in the United States?
    The use of a common currency, such as the dollar, is a positive fact in U.S. economic data.
  • What is one assumption of the prevailing rational-world paradigm?
    Individuals act rationally based on available information, a positive assumption.
  • Why do centrally planned economies have difficulty meeting consumer needs?
    Centrally planned economies often lack accurate positive information about consumer preferences.
  • Which is the most reasonable prediction in economic analysis?
    A prediction based on positive, testable statements is most reasonable.
  • What leads to a rational answer in economic analysis?
    Using positive analysis and factual information leads to rational answers.
  • What are the rules of conduct enacted and enforced by governments?
    Laws and regulations are positive facts enacted and enforced by governments.
  • What might happen to a country’s economy and standard of living without property rights?
    Without property rights, economic growth and living standards may decline, a positive statement.
  • What does it mean to say that two variables are positively associated?
    It means that as one variable increases, the other also increases, a positive relationship.
  • According to the concept of bounded rationality, how do managers make decisions?
    Managers make decisions based on limited information, which is a positive statement about behavior.
  • What does it mean to say that two variables are positively associated?
    It means both variables move in the same direction, a factual relationship.
  • Economic policy must strike a balance between ideals and what?
    Economic policy must balance normative ideals with positive facts.
  • An important part of a cost-benefit analysis is identifying what?
    Identifying all relevant positive costs and benefits is crucial.
  • An extreme result of free-market capitalism without government regulation is referred to as what?
    It is referred to as market failure, a positive outcome.
  • A benefit of informed decisions is that they...
    They are based on positive analysis and lead to better outcomes.
  • Belief that the British should have colonists’ permission to pass taxes is an example of what type of statement?
    It is a normative statement, expressing an opinion.
  • A potential benefit for a government leader using a cost-benefit analysis is what?
    Making decisions based on positive, factual information.
  • Isolating relevant costs is desirable because...
    It allows for accurate positive analysis in decision-making.
  • What is it called when you make predictions about data not yet recorded?
    It is called forecasting, based on positive analysis.
  • Give an example of a normative statement.
    'Healthcare should be free for everyone.'
  • Which of these is not a characteristic of a command economic system?
    Reliance on positive market signals is not a characteristic of a command system.
  • Give another example of a normative statement.
    'The government ought to lower taxes.'
  • Give an example of a positive statement.
    'Lowering taxes increases disposable income.'
  • True or false: The efficient markets hypothesis holds only if all investors are rational.
    False. The hypothesis relies on positive analysis of market information, not just investor rationality.
  • Two major virtues of the market system are that it...
    It efficiently allocates resources and responds to positive incentives.
  • Classify each of the following statements as positive or normative.
    Positive statements describe facts; normative statements express opinions about what should be.
  • If the financial markets are efficient then:
    Prices reflect all available positive information.
  • In constructing models, economists...
    Economists use positive statements and assumptions to simplify reality.
  • A knowledge problem exists when...
    Decision-makers lack sufficient positive information to make informed choices.
  • Suppose that for a particular business there are no implicit costs. Then...
    All costs are explicit and can be analyzed positively.
  • Economic models are ________.
    Simplified representations using positive statements to explain economic phenomena.
  • What does the term money neutrality mean?
    Money neutrality is a positive concept stating that changes in the money supply only affect prices, not real output.
  • A positive statement is concerned primarily with what?
    Describing facts about how the world is.
  • True or false: Positive economics encourages value judgments.
    False. Positive economics avoids value judgments and focuses on facts.
  • Identify whether these statements are normative or positive.
    Normative statements express opinions; positive statements describe facts.
  • A positive statement is always...
    A factual claim about the world, regardless of its truth.
  • What is Gordon's bird in the hand fallacy?
    It refers to a mistaken belief based on normative reasoning rather than positive analysis.