Positive And Normative Economic Statements Flashcards
Distinction between positive and normative economic statements
A positive economic statement is one that is fact such as inflation has increased by 1% in the last quarter. This is not an opinion and therefore can’t be contested. This is in contrast to normative economic statements such as monetary policy is ineffective at getting an economy out of recession. This is an opinion rather than a fact and therefore may be disputed between different economists.
The role of value judgements in influencing economic decision making and policy
A value judgement is a decision made based on a persons values and opinion. The government makes judgements based on their own opinions and values, as a result of this, the decisions that they make are normative. This is why there is more than one political party and that their policies are different. This is in contrast to economic analysis which is often positive. For example if the economy grows by 2% in the last quarter then that is a positive statement. Overall, economic decisions made by individuals and policy decisions made by governments will be based upon their value judgement (normative)
