Classify each of the following statements as a positive or normative, and explain:

  • Society faces short run trade offs between inflation and unemployment.
  • A reduction in the rate of growth of money will reduce the rate of inflation.
  • The bank of Ghana should reduce the rate of growth of money.
  • Society ought to require welfare recipients to look for jobs.
  • Lower tax rates encourage more workers and more savings.
  • Expert Answers

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    Positive statements are based on the truth while normative ones are subjective. There is no way to measure the accurateness of a normative statement because it is just an opinion.

    Statement 1 is positive because it is based on the short-term Philip’s curve. It is a fact that in the short-term, unemployment increases as inflation goes down.

    Statement 2 is positive because money supply and inflation have a direct relationship. Through monetary policies, the Federal Reserve Bank can reduce interest rates to increase the money supply and boost economic activity. Since there is more money in circulation, prices are likely to rise as sellers seek to maximize profits.

    Statement 3 is normative because it is the opinion of one individual. That person believes that the bank of Ghana should reduce the money supply but doesn’t state why or give evidence to prove that the bank is responsible for the country’s economic woes.

    Statement 4 is normative because the individual is against welfare. He or...

    (The entire section contains 3 answers and 930 words.)

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