4.1.1.1 Economic methodology Quiz: AQA Economics, Unit 1

The 20 questions

1. Which of the following is a positive statement?

   • Governments should raise the minimum wage to the living wage, because it is the fairest way to help low-paid workers in every region.
   • It is unacceptable that some workers in a wealthy country earn less than a decent living wage for the effort they put into their jobs.
   • A fair economy must guarantee a minimum income for every household, whatever the level of taxation and public spending on welfare.
   • Raising the minimum wage by 10% reduced hours worked among young workers in the study.

2. Which of the following is a normative statement?

   • Inflation was 2.5% in March, which is a figure the Office for National Statistics published after its monthly price index release.
   • Unemployment rose by 300,000 during the recession of the early 1980s, according to the official labour force survey published at the time.
   • Income tax on high earners rose from 40% to 45% in 2010, and the change was recorded in the official tax statistics for that year.
   • Income tax on high earners should be increased to reduce inequality.

3. Which statement best describes a positive statement?

   • A claim about what ought to happen based on moral principles.
   • A statement that can be tested against evidence to be shown true or false.
   • A statement of opinion about the desirability of an economic policy.
   • A statement that reflects the political views of the government of the day.

4. Which of the following is a value judgement?

   • Demand for petrol is price inelastic in the short run.
   • Exports as a share of GDP rose from 28% to 31%.
   • A 5% rise in interest rates reduces consumer spending.
   • Income inequality is too high and must be reduced.

5. Economics is classified as a social science mainly because it:

   • uses only controlled laboratory experiments with fixed variables to test theories before they are applied to real markets and economies.
   • is concerned only with the behaviour of firms, governments and banks, and it ignores the choices made by households and individuals.
   • proves all of its predictions with mathematical certainty, so its conclusions never depend on data or evidence.
   • studies how individuals and societies make choices about scarce resources.

6. A key difference between economics and the natural sciences is that economists:

   • never use models, diagrams or mathematics in their analysis, relying instead on personal opinion and anecdote about how markets behave.
   • usually cannot run controlled experiments on whole economies.
   • always agree on the correct answer to every policy question, because the evidence in economics is complete and never open to debate.
   • rely solely on direct observation of the natural world, and they do not use data about prices, incomes or quantities in their analysis.

7. Which factor is most likely to lead two people to rank the same policy options differently?

   • Their differing moral and political judgements about the consequences.
   • The number of diagrams each person has studied, and how many they can draw from memory under exam conditions.
   • The exchange rate at the time of each person's decision, and the price of imported goods that each person happened to buy in that period.
   • The date on which each person first learned about the policy, and which news source they used to learn of it.

8. Which statement is a positive statement about a tax?

   • A tax on sugary drinks raises revenue for the government.
   • A tax on sugary drinks ought to be abolished immediately.
   • A tax on sugary drinks is the most sensible way to improve health.
   • A tax on sugary drinks is fair to food producers.

9. A government minister claims: 'Cutting welfare benefits is the morally correct choice.' Which best describes this claim?

   • A normative statement, because it contains a moral judgement.
   • A forecast, because it describes a future policy effect.
   • A factual statement, because welfare spending can be measured.
   • A positive statement, because it refers to benefits.

10. Which of the following is an example of an economist making a positive statement about a market?

    • Rent controls reduce the supply of rental housing in the long run.
    • Rent controls are the best way to help poorer families, and any government that refuses to introduce them is failing its citizens badly.
    • Rent controls are an unfair burden on landlords, who should be compensated by the state for any loss of rental income they experience.
    • Rent controls should be introduced to protect tenants from rising rents, because housing is a basic need that the state should guarantee.

11. Which of the following best explains why economists disagree about policy even when they agree on the evidence?

    • Economic models cannot be used to analyse policy at all, so policy makers must rely on political instinct and public opinion instead.
    • Economists never agree on any data, because each school of thought collects its own figures and rejects the statistics used by its rivals.
    • Positive statements are always wrong in economics, so any evidence that economists collect about markets can be ignored in policy debates.
    • Policy choices also depend on value judgements about what outcomes are desirable.

12. Which statement correctly contrasts positive and normative economics?

    • Positive economics describes what ought to be; normative economics describes what is, using only data and measured values from the economy.
    • Both describe only what ought to be, using different forecasting methods, but they differ in the statistical software that analysts use.
    • Positive economics describes what is; normative economics describes what ought to be.
    • Both describe only what is, but normative economics uses more diagrams, graphs and mathematical equations to present its findings.

13. A study finds that a rise in fuel duty reduces the number of car journeys by 3%. What type of statement is this?

    • Normative, because fuel duty is a tax.
    • Positive, because it can be tested against traffic data.
    • Normative, because reducing journeys is good for the environment.
    • Neither, because it is an opinion about a tax.

14. Which of the following statements is most clearly normative?

    • Governments should prioritise reducing fuel poverty over cutting the deficit.
    • Demand for beef fell after a widely reported health scare in 1996, and the fall in quantity bought was measured in retail sales data.
    • The UK has a floating exchange rate, which means that the pound's value against other currencies is set by the forces of supply and demand.
    • Average household spending on energy was £1,400 last year, according to the official household expenditure survey.

15. Which of the following best describes how value judgements influence economic policy?

    • They have no effect at all, because economics is objective and policy follows directly from the results of models.
    • They determine the shape of the production possibility curve, which is fixed by the moral views of the government in office at the time.
    • They only affect the calculation of elasticities and the statistical methods that economists use to estimate demand and supply curves.
    • They shape which outcomes policy makers choose to pursue, even when the evidence is the same.

16. Which of the following statements is a positive statement about the economy?

    • The economic recovery is good news for everyone in society, and it shows that the government has managed the economy very well indeed.
    • Income should be redistributed to the poorest 10% of households, so that everyone in the country has a fair share of national income.
    • Higher interest rates tend to reduce borrowing and spending by households.
    • Governments should aim for an inflation rate of exactly 2%, because price stability is the most important objective of economic policy.

17. Why might a policy that is positively justified by evidence still be debated?

    • Because evidence in economics is always incorrect, so policy debates are really about which wrong figures to believe.
    • Because the policy's benefits and costs fall on different groups, which raises value questions.
    • Because economists are unable to calculate any costs of a policy, so its full effects can never be known in advance.
    • Because positive statements cannot be tested against any data, so they can only be accepted or rejected on the basis of personal belief.

18. A student writes: 'Economists should measure happiness rather than GDP.' What is this?

    • A forecast about future GDP figures, because the student is predicting that the measured level of national output will change in future.
    • A normative statement about what economists should aim to measure.
    • A positive statement about measurement, because it describes how national accounts are compiled by the statistics office each year.
    • A statement of fact about national accounts, because GDP is a number that is calculated from the output of all firms in the economy.

19. Which of the following is the best example of a value judgement in economic decision making?

    • The price of wheat rose by 8% after a drought, and the increase was recorded in the monthly commodity price data for that year.
    • Consumer spending fell in the final quarter of the year, which was shown clearly in the official national accounts for that period.
    • Interest rates were cut to 0.5% in 2020, and the central bank announced the change in a formal press release that same morning.
    • Environmental protection is more important than short-term economic growth.

20. Which of the following is a normative statement about economic policy?

    • Cutting the basic rate of income tax raised government borrowing last year, according to the official public finance figures for that year.
    • The basic rate of income tax is currently 20% in the UK, which is the rate set out in the published rates for the current tax year.
    • The government should reduce the basic rate of income tax to encourage work.
    • Cutting the basic rate of tax will increase the number of people in work, and this effect can be checked against labour market data.

Related quizzes

• The nature and purpose of economic activity Quiz · 4.1.1.2 · 20 questions
• Economic resources Quiz · 4.1.1.3 · 20 questions
• Scarcity, choice and the allocation of resources Quiz · 4.1.1.4 · 20 questions
• Production possibility diagrams Quiz · 4.1.1.5 · 20 questions
• Consumer behaviour Quiz · 4.1.2.1 · 20 questions
• Imperfect information Quiz · 4.1.2.2 · 20 questions
• Aspects of behavioural economic theory Quiz · 4.1.2.3 · 20 questions
• Behavioural economics and economic policy Quiz · 4.1.2.4 · 20 questions
• The determinants of the demand for goods and services Quiz · 4.1.3.1 · 20 questions
• Price, income and cross elasticities of demand Quiz · 4.1.3.2 · 20 questions