Economic Methodology (IB)

In economics a statement is positive if

• it concerns the factual outcomes of an economic action.

• it examines the desirability of government economic policy.

• it assumes current economic conditions remain unchanged

• it is based upon the opinion of an economic adviser.

Skilled actors deserve a high income because they bring pleasure to people who attend theatre.

• It is positive st. because greater skill leads to higher pay

• It is normative statement because it expresses an opinion

• It is positive st. because actors bring pleasure to people

• It is normative st. because services and goods are outputs

What must be true of a positive statement?

• It is one that can be shown to be correct or incorrect

• It is one with which everyone is in agreement

• It is one that is true by definition

• It is one that deals with positive changes in the economy

Positive economics focuses on __________ , which are based upon __________.

• statements, opinions

• economic development, prior case studies

• statements, facts

• normative statements, facts

Which of the following is a normative statement?

• Spain’s unemployment rate was 19% in 2023

• China’s corporate tax rate is 25%

• The inflation rate in China stood at 2.9% in 2022

• Indian government needs to boost spending on education by 9%

What does the phrase 'ceteris paribus' mean?

• All the resources used are of equal quality.

• Everything else remains unchanged.

• The variable under consideration is held constant.

• The variable under consideration is held constant.

What's the difference between economic theory and hypothesis?

• They belong to the same stage of social sciences method and cannot be divided

• Economic theory is based of several hypotheses which were tested successfully

• Economic theory leads to refutation of hypothesis if the experiment wasn't designed properly

• Hypothesis builds economic models while economic theory creates further changes in development of economics as a science

A model in economics is

• anything that imitates real-life economic events

• a simplification of real-life economic events

• a tested hypothesis that can explain real-life economic events

• a theory that is build based on real-life economic events

What does refutation mean in economic theory?

• when the theory is proved valid

• when the theory is proved invalid

• when the theory cannot be proved based on the empirical evidence at hand

• when the theory is proved false by the empirical evidence

Sort the following statements into positive or normative

Groups:

(a) Positive statement

,

(b) Normative statement

• The government must intervene in all markets to improve resource allocation.

• China has never had a balance of payments surplus.

• Increased investment in infrastructure can lead to economic growth.

• Low inflation will provide a more stable macro economy.

• Income inequality must be addressed through progressive taxation policies.

• Low inflation is preferable to low unemployment as a government aim.

• It is essential for the government to increase funding for education.

• The distribution of income and wealth in most western European countries is unequal.

• Efficient allocation of resources can lead to economic efficiency.

• Technological advancements have improved productivity in the manufacturing sector.

• Maintaining the real income of pensioners needs to be a priority.

• Balancing the budget cannot be more important than reducing inflation.