2- Economic Data and Positive/Normative Statements

Question 1

Base Period definition

Answer 1

The period, such as a year or a month, with which all other values in a series are compared.

Question 2

Index number definition

Answer 2

An indicator showing the relative value of one number to another from a base of 100. It is often used to present an average of a number of statistics.

Question 3

Nominal Values

Answer 3

Values unadjusted for the effects of inflation. (i.e values at current prices).

Question 4

Real values

Answer 4

Values adjusted for the effects of inflation (i.e values at constant prices).

Question 5

GDP definition

Answer 5

The value of all goods and products produced in an economy.

Question 6

Nominal GDP

Answer 6

GDP without the effects of inflation.

Question 7

Real GDP

Answer 7

GDP with the effects of inflation.

Question 8

GDP per Capita

Answer 8

GDP / Population.

Question 9

What is a positive statement?

Answer 9

They are objective, factually based comments that can be tested. They allow scientific testing to take place that can be accepted or rejected. They are impartial and unbiased. It doesn’t have to be right.

Question 10

What is a normative statement?

Answer 10

They are subjective, questionable comments that are difficult to test. They are influenced by opinion and prejudice. They are partial and biased. They often include the words- best, should. They contain value judgements.

Question 11

What is a value judgement?

Answer 11

Opinions put forward by individuals that are difficult to test. They are judgements based on someone’s values/morals.

Question 12

What will happens if economic agents base decisions on positive statements?

Answer 12

Basing decisions on positive statements is likely to lead to certain outcomes e.g increasing price of a normal good will decrease demand.

Question 13

Why are value judgements also used to make economic decisions?

Answer 13

Because with an uncertain future, comes uncertain decision so a mix of positive and normative statements are used to make economic decisions.

Question 14

What influences are there on people’s views concerning the best option when making decisions?

Answer 14

• Positive consequences of different decisions:
  this depends on subjective nature of outcome as with value judgements it’s not always clear to see if one option is better than another. E.g Should the UK remain in the EU.
• Moral and Political judgements:
  the best option for society may differ from what’s best for society. So people’s self interest is used.