Lesson 1.1.2

1.1.2 Positive and normative economic statements Quiz: Pearson Edexcel Economics A, Unit 1

20 questions

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Lesson 1.1.2, Positive and normative economic statements: 20 multiple choice questions for the Pearson Edexcel Economics A (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.

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The 20 questions

  1. Which statement is normative?

    • Unemployment is higher among young workers than among older workers in most years.
    • The government should increase the minimum wage in order to reduce poverty.
    • An increase in the minimum wage will raise the wage bill of firms that employ low-paid workers.
    • Average earnings rose by 3 per cent over the last twelve months across the whole economy.

  2. Which of these is a positive economic statement?

    • Income tax is the fairest way to raise revenue for public services in the economy.
    • A rise in income tax will reduce the disposable income of households.
    • Higher income tax rates are unjust to the most successful entrepreneurs in society.
    • Income tax should be cut to encourage people to work harder and invest more.

  3. What distinguishes a normative statement from a positive statement?

    • A normative statement contains a value judgement about what ought to be, whereas a positive statement can be tested against evidence.
    • A normative statement is always false, whereas a positive statement is always true.
    • A normative statement is based on data, whereas a positive statement is based on personal opinion.
    • A normative statement uses numbers, whereas a positive statement uses only everyday words.

  4. Which term describes a judgement about what is desirable, which then influences economic decisions and policy?

    • Marginal utility
    • Value judgement
    • Ceteris paribus assumption
    • Opportunity cost

  5. Which of these is most likely to be a value judgement in economics?

    • Higher benefit payments increase the consumption of goods by recipients in the short run.
    • The Gini coefficient measures the degree of income inequality within a country at a point in time.
    • Governments should redistribute income to reduce inequality, even if this lowers economic growth.
    • Redistributing income through transfers changes the disposable income of low-income households.

  6. How do value judgements influence economic decision making?

    • They guarantee that all economic predictions made by governments will turn out to be correct.
    • They shape which objectives, such as equity or environmental protection, policymakers choose to prioritise.
    • They make positive economic analysis unnecessary when designing and evaluating government policy.
    • They determine the exact numerical value of the price elasticity of demand for a good in the market.

  7. Which statement is a positive statement about the effect of a sales tax?

    • A sales tax is the best way to fund public healthcare in a modern economy with an ageing population.
    • A sales tax of 20 per cent is too high and should be reduced to help struggling families.
    • Sales taxes are morally wrong because they fall unfairly on poorer households in every case.
    • A sales tax of 20 per cent raises the price paid by consumers, so the quantity demanded tends to fall.

  8. A politician says 'Rent controls are unfair to landlords and should be abolished.' An economist says 'Rent controls reduce the supply of rental housing over time.' Which is the positive statement?

    • The politician's statement, because it describes what the politician believes should happen.
    • The economist's statement, because it can be tested against housing market data.
    • Both statements are normative, because both concern government policy on housing and rents.
    • Neither statement is positive, since both refer to the effects of rent controls on landlords.

  9. Which statement would a normative economist be most likely to make about a carbon tax?

    • Carbon taxes are currently in force in a number of countries around the world.
    • A carbon tax raises the price of fossil fuels, which reduces the quantity of fuel demanded.
    • Carbon tax revenue equals the tax rate multiplied by the quantity of fuel sold in the market.
    • A carbon tax should be introduced because its environmental benefits outweigh the costs to consumers.

  10. Which of the following statements is a normative economic claim?

    • The top rate of income tax is too high and should be cut to improve fairness and incentives.
    • Cutting income tax raises the disposable income of higher earners in the economy.
    • Changes in the top tax rate affect the labour supply decisions of some high-income workers.
    • A cut in the top rate of income tax will reduce government tax revenue if other factors remain unchanged.

  11. A report states that a 5p sugar tax will reduce soft drink consumption. One economist thinks this is a good policy, the other does not. What does this show?

    • Their disagreement shows that the positive prediction about consumption must be false.
    • One of them must have made an error in using the supply and demand model to analyse the tax.
    • They agree on a positive statement, while their disagreement reflects different value judgements about the policy.
    • Their agreement shows the policy is normative and so cannot be debated at all.

  12. Which statement about the minimum wage is positive?

    • A minimum wage is fairer than a free market wage because it protects vulnerable workers.
    • The minimum wage ought to be set at the level of the living wage in every region.
    • A rise in the minimum wage will increase the hourly earnings of workers who remain employed.
    • A rise in the minimum wage is the most important tool for reducing poverty in the country.

  13. Which factor is most likely to lead two people with the same evidence to disagree about a policy?

    • Differences in the number of positive statements each person has read about the policy.
    • Different value judgements about the relative importance of objectives such as equality and economic growth.
    • Differences in the accuracy of the statistical data that each person has been given to use.
    • Differences in the mathematical methods used to analyse the same demand curve for the good.

  14. Which of the following would be classified as a positive statement?

    • A fall in interest rates is good news for the economy and should be welcomed by everyone.
    • Cutting interest rates is likely to increase aggregate demand in the short run.
    • Cutting interest rates is the right response to a recession because it helps ordinary households.
    • The central bank should prioritise unemployment over inflation when setting interest rates each month.

  15. A student writes: 'The government should spend more on education because it is the best investment.' How should this statement be classified?

    • Positive, since it refers to government spending that can be measured in the national accounts.
    • Normative, since it includes a judgement about what the government should do.
    • Positive, since it makes a claim about investment returns that economists can test directly.
    • Neither positive nor normative, since statements about government spending lie outside economics.

  16. Why might a positive forecast be accepted by people with very different political views, while the policy conclusion drawn from it is not?

    • Forecasts are always exact, so no one has grounds to disagree with them about future outcomes.
    • The forecast is normative, so people agree on it, while policy conclusions are purely positive and therefore contested.
    • The forecast relies on evidence and logic that can be tested, but the policy conclusion depends on value judgements about objectives.
    • Policy conclusions depend only on the numerical value of elasticities, which are fixed and identical for all people.

  17. A policymaker argues that a subsidy for electric cars is justified because it will increase the number of electric cars sold. What is the main weakness in this argument?

    • It ignores whether the benefit of more electric cars justifies the cost to taxpayers, which is a value judgement.
    • It fails because subsidies always reduce the quantity of goods sold in a market in every case.
    • It relies on a normative claim that is clearly true, so the policy is automatically justified without further analysis.
    • It is wholly positive, so it cannot be used to support any policy at all in a democracy.

  18. An economist says 'Minimum wages reduce employment, so they should be abolished.' Which part of this statement is positive and which is normative?

    • The first part is a positive prediction, while the second part is a normative conclusion involving value judgements.
    • Both parts are normative, since any claim about labour markets requires a moral view of the workers involved.
    • Both parts are positive, since both can be tested against labour market data in the economy.
    • The first part is normative because it refers to employment, and the second part is positive because it refers to abolition.

  19. Why do economists often separate positive analysis from normative conclusions when advising government?

    • It makes clear which claims rest on evidence and which rest on value judgements, so policy choices are transparent.
    • It ensures that positive statements are always more influential in policy debates than normative ones.
    • It guarantees that policies advised by economists will achieve every objective that government sets for itself.
    • It allows economists to avoid any responsibility for the consequences of the advice they give.

  20. Which statement best evaluates the claim 'the government should spend more on healthcare because it is the most important public service'?

    • It is normative, because the claim that healthcare is most important is a value judgement that evidence alone cannot settle.
    • It is positive, because it follows logically from the national accounts identity for government spending.
    • It is normative only if the amount of spending is measured in nominal rather than real terms.
    • It is positive, because healthcare spending can be measured and compared across public services in the accounts.

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